COMPREHENSIVE ANNUAL. Leading the Way - Everyday. For the Fiscal Year Ended August 31, 2007 League City - Texas

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1 Leading the Way - Everyday COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Fiscal Year Ended August 31, 2007 League City - Texas Clear Creek Independent School District

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3 Comprehensive Annual Financial Report For the Fiscal Year Ended August 31, 2007 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT 2425 East Main Street, League City, Texas Prepared By The Department of Budget and Finance: Paul McLarty, RSBO, RTSBA Chief Financial Officer Jeff Kohlenberg, CPA, RTSBA Director - Finance Department

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5 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT TABLE OF CONTENTS Page Exhibit/ Table Introductory Section Principal Officials and Advisors Certificate of Board Transmittal Letter GFOA Certificate of Achievement ASBO Certificate of Excellence Organizational Chart i iii v xiii xv xvi Financial Section Independent Auditors Report 3 Management s Discussion and Analysis (Required Supplementary Information) 7 Basic Financial Statements: Government-Wide Financial Statements: Statement of Net Assets 19 A-1 Statement of Activities 20 B-1 Fund Financial Statements: Balance Sheet - Governmental Funds 22 C-1 Reconciliation of Balance Sheet for Governmental Funds to the Statement of Net Assets 25 C-2 Statement of Revenues, Expenditures, and Changes in Fund Balance - Governmental Funds 26 C-3 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balance of Governmental Funds to the Statement of Activities 28 C-4 Statement of Net Assets - Proprietary Fund 29 D-1 Statement of Revenues, Expenses and Changes in Fund Net Assets - Proprietary Funds 30 D-2 Statement of Cash Flows - Proprietary Funds 31 D-3 Statement of Fiduciary Assets and Liabilities 32 E-1 Notes to Financial Statements 33 E-2 Required Supplementary Information: Schedule of Revenues, Expenditures and Changes in Fund Balances - Original Budget, Amended Final (GAAP Basis) and Actual - General Fund 70 F-1 Notes to Required Supplementary Information 71 F-2 Other Supplementary Information: Combining and Individual Statements and Budget Comparisons: Combining Balance Sheet - Nonmajor Governmental Funds 79 G-1 Combining Statement of Revenues, Expenditures and Changes in Fund Balance - Nonmajor Governmental Funds 90 G-2

6 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT TABLE OF CONTENTS Financial Section (Continued) Page Exhibit/ Table Other Supplementary Information (Continued): Schedule of Revenues, Expenditures and Changes in Fund Balance - Original Budget, Amended Final And Actual - National School Breakfast and Lunch 104 H-1 Schedule of Revenues, Expenditures and Changes in Fund Balance - Original Budget, Amended Final and Actual - Debt Service Fund 103 H-2 Combining Statement of Net Assets - Nonmajor Enterprise Funds 107 I-1 Combining Statement of Revenues, Expenses, and Changes in Net Assets - Nonmajor Enterprise Funds 108 I-2 Combining Statement of Cash Flows - Nonmajor Enterprise Funds 109 I-3 Combining Statement of Net Assets - Nonmajor Internal Service Funds 110 I-4 Combining Statement of Revenues, Expenses, and Changes in Net Assets - Nonmajor Internal Service Funds 111 I-5 Combining Statement of Cash Flows - Nonmajor Internal Service Funds 112 I-6 Compliance Schedules: Schedule of Delinquent Taxes Receivable 116 J-1 Schedule of Expenditures for Computation of Indirect Cost for General and Special Revenue Funds 118 J-2 Optimum Fund Balance Calculation Schedule (Unaudited) - General Fund 119 J-3 Statistical Section Net Assets by Component Changes in Net Assets Fund Balances of Governmental Funds Changes in Fund Balances of Governmental Funds Revenues by Source for Governmental Funds Assessed Value and Actual Value of Taxable Property Property Tax Rates - Direct and Overlapping Governments Principal Taxpayers Property Tax Levies and Collections Ratios of Outstanding Debt by Type Ratios of Net General Obligation Bonded Debt Outstanding Computation of Estimated Direct and Overlapping Debt Legal Debt Margin Information Demographic and Economic Statistics Principal Employers Full-Time Equivalent District Employees by Position Operating Statistics Teacher Base Salaries School Building Information

7 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT TABLE OF CONTENTS Financial Section (Continued) Government Auditing Standards Page Exhibit/ Table Independent Auditor s Report on Internal Control Over Financial Reporting And on Compliance And Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 163 Independent Auditor s Report on Compliance With Requirements Applicable to Each Major Program And on Internal Control Over Compliance in Accordance With OMB Circular A Federal Awards Section Schedule of Findings and Questioned Costs 169 Schedule of Expenditures of Federal Awards 171 K-1 Notes to Schedule of Expenditures of Federal Awards 173

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9 Introductory Section

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11 Clear Creek Independent School District Principal Officials And Advisors Board Of Trustees Paula J. Tomasi, President Chief Financial Officer Anchor Marine & Industrial Supply Dee Scott, Secretary Owner Dee Scott Insurance Stuart J. Stromeyer, Vice President Executive Vice President Cunningham Lindsey International Ken Baliker, Trustee Vice President P.M.I. Holdings, North America, Inc. Robert Allan Davee, Trustee Partner/Attorney Mills Shirley, LLP Ann Hammond, Trustee Consultant NASA Johnson Space Center Ralph Parr, Trustee Retired Educator Administration Dr. Greg Smith - Superintendent of Schools Paul McLarty - Chief Financial Officer Consultants And Advisors Null-Lairson, P.C. Texas City, Texas - Independent Auditors Andrews Kurth Houston, Texas - Bond Counsel RBC Capital Markets, Inc. Houston, Texas - Financial Advisor i

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13 CERTIFICATE OF THE BOARD Clear Creek Independent School District Harris & Galveston Name of School District County Co.-Dist. Number We, the undersigned, certify that the annual financial reports for the above named school district were reviewed and approved for the year ended August 31, 2007, at a meeting of the Board of Trustees of such school district on the 28 th day of January, iii

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15 Committed to Excellence in Education Greg Smith, Ph.D. Superintendent of Schools January 24, East Main Street League City, Texas (281) To the Board of Trustees and Taxpayers of the Clear Creek Independent School District: The Texas Education Code requires that all school districts file a complete set of financial statements with the Texas Education Agency (TEA) within 150 days of the close of each fiscal year. The financial statements must be presented in conformity with generally accepted accounting principles (GAAP) and audited in accordance with generally accepted auditing standards by a firm of licensed certified public accountants. Pursuant to that requirement, we hereby issue the Comprehensive Annual Financial Report of the Clear Creek Independent School District (the District ) for the fiscal year ended August 31, This report consists of management s representations concerning the finances of the District. Consequently, management assumes full responsibility for the completeness and reliability of all of the information presented in this report. To provide a reasonable basis for making these representations, management of the District has established a comprehensive internal control framework that is designed both to protect the government s assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of the District s financial statements in conformity with GAAP. Because the cost of internal controls should not outweigh their benefits, the District s comprehensive framework of internal controls has been designed to provide reasonable rather than absolute assurance that the financial statements will be free from material misstatement. As management, we assert that, to the best of our knowledge and belief, this financial report is complete and reliable in all material respects. The comprehensive annual financial report is composed of three main sections: introductory section, financial section, and the statistical section. The introductory section is primarily comprised of a listing of the principal officials and advisors, an organizational chart, and this letter of transmittal. The financial section is made up of five parts: 1) independent auditor s report, 2) management s discussion and analysis, 3) basic financial statements, 4) required supplementary information, and 5) other supplementary information, which is an optional section that presents additional information such as combining statements for internal service funds, and required compliance information. The statistical section is designed to reflect social and economic data, financial and fiscal trends, and the fiscal capacity of the District. The District s financial statements have been audited by Null-Lairson, P.C., CPAs, a firm of licensed certified public accountants. The goal of the independent audit was to provide reasonable assurance that the financial statements of the District for the fiscal year ended August 31, 2007 are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and, evaluating the overall financial statement presentation. The independent auditor concluded, based upon the audit, that there was a reasonable basis for rendering an unqualified opinion and that the District s financial statements for the period ended August 31, 2007, are fairly presented in conformity with GAAP. The independent auditors report is presented as the first component of the financial section of this report. v

16 The independent audit of the financial statements of the District was part of a broader, federally-mandated Single Audit designed to meet the special needs of federal grantor agencies. The standards governing Single Audit engagements require the independent auditor to report not only on the fair presentation of the financial statements, but also on the audited government s internal controls and compliance with legal requirements, with special emphasis on internal controls and legal requirements involving the administration of federal awards. These reports are included in the Federal Awards section of the Comprehensive Annual Financial Report. GAAP require that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement MD&A and should be read in conjunction with it. The District s MD&A can be found immediately following the report of the independent auditors. Profile of the District The Clear Creek Independent School District is the 27 th largest of the 1,037 school districts in Texas, encompasses 103 square miles and is located 20 miles south of Houston along Interstate 45/Gulf Freeway. The District was created in 1948 when schools in League City, Seabrook, Webster and Kemah consolidated to form the Clear Creek Independent School District. At the time the schools were unified, there were fewer than 1,000 students in four schools. The district now employs over 4,400 persons, 2,475 of which are teachers. We are proud that more than 36 percent of the faculty members have a master s degree. The District now serves over 36,300 students and operates twenty-four elementary schools, eight intermediate schools, four comprehensive high schools, and two alternative secondary campuses. The school district s boundaries are not the same as municipal boundaries; therefore, the District provides instructional services to children who live in the communities of League City, Seabrook, Webster, Kemah, El Lago, Nassau Bay, Clear Lake Shores and Taylor Lake Village, along with portions of Bacliff, Friendswood, Houston and Pasadena. The District encompasses parts of Galveston and Harris counties. With NASA/Johnson Space Center, the University of Houston-Clear Lake, San Jacinto Community College, College of the Mainland, the fishing and recreation areas of Galveston Bay, chemical and energy resource industries and the numerous high-tech and engineering companies that form the Clear Creek community, our district recognizes that strong and dynamic partnerships are vital to academic achievement, as well as character education. Our partnerships and academic offerings are unparalleled to any school system in the state or nation. Clear Creek ISD prides itself as being one of the premier school systems in Texas. The purpose and responsibility of the District is to provide a thorough and efficient educational system for the children, pre-kindergarten through grade 12, enrolled in public schools within its boundaries, whereby each child has access to programs and services that are appropriate to his or her educational needs. In addition to its regular educational program, the District offers comprehensive programs in the areas of career and technology education, special education, bilingual education, compensatory education and gifted and talented education. The District is fully accredited by the Texas Education Agency (TEA). Our students and staff continue to excel in many arenas. In fact, Clear Creek ISD has the distinction of being the only large school district (a district with more than 25,000 students) in the State of Texas to have achieved a Recognized rating from the TEA for ten of the last eleven years. Currently, Clear Creek ISD is the largest school district in Texas to hold the Recognized rating and is home to a record number of Exemplary rated schools. Those designations are issued by the TEA and are based on how students perform on TAKS, State- Developed Alternative Assessment scores, high school completion rates, and annual dropout rates. The District received a Recognized rating from the TEA in Overall, fifteen campuses earned the Exemplary status (the highest rating in Texas) up from eleven in the previous year. Thirteen campuses earned a Recognized status and no campuses were rated Low Performing. This is an indication of the rigorous standards established under the Texas Assessment of Knowledge and Skills vi

17 (TAKS). Student SAT scores are routinely well above local, state and national averages. Approximately 80 percent of graduating seniors plan to attend college or technical schools. Our student body reflects the cultural diversity of Texas with 55 home languages spoken. Of the approximately 36,300 students enrolled, 62.3% are Anglo, 18.6% are Hispanic, 9.8% are Asian and 8.9% are African-American. The heart of a school district is its people and the Clear Creek Independent School District takes great pride in its highly qualified Board of Trustees, administration, faculty and staff, all of whom are dedicated to providing the best possible education environment for all students. Parent and community interest and support strengthen the school program. The District is not included in any other governmental reporting entity since the Board of Trustees is elected by the public and has decision-making authority. Residents of the District elect a seven-member Board of Trustees, who serve overlapping three-year terms. There are no component units included in the reporting entity. Economic Condition And Outlook The information presented in the financial statements is perhaps best understood when it is considered from the broader perspective of the specific environment within which the District operates. Local Economy The District currently enjoys a favorable economic environment and local indicators point to continued stability. The economy of the District and its surrounding area is diversified, with oil and gas as the base industrial activity. The abundance of key natural resources along the Texas Gulf Coast has created the country s greatest concentration of petrochemical complexes within the overall coastal area. Though District industries are largely petrochemical in nature, they are not exclusively so. Originally a rice farming and ranching area, the lakes and waterways of the District offer not only boating and fishing sports and revenues from recreational tourist facilities, but also represent a hub of industrial development lining the nearby Houston Ship Channel. The Johnson Space Center of the National Aeronautics and Space Administration ( NASA ), which is currently responsible for NASA s space shuttle and space station projects, is an important part of the Clear Lake area economy, both as an employer of almost 2,900 civil service employees and more than 13,350 local contractors. In addition, Space Center Houston, a visitor complex and educational facility, has approximately 800,000 visitors annually. The rate and extent of continued development within the Clear Lake Area will be influenced by the degree of continued federal funding of Johnson Space Center projects. A major employment base in the area has been the Bayport Industrial Development ( Bayport ), a planned industrial development of approximately 10,750 acres with approximately 62 industrial plants in operation. Bayport is located in southeast Harris County approximately 23 miles from the central business district of the City of Houston. It includes a 40-foot deep water port and channel facility connected to the Houston Ship Channel, barge dock facilities, a pipeline network and railroad service. Presently serving the Clear Lake area are three general hospitals, one major mall, one university and two junior colleges. A significant portion of the District is located in Harris County, the most populous county in the State of Texas, with a 2000 estimated population of 3,400,578, an increase of approximately 20.66% since The county s economy is based on industry, mineral production, shipping and agriculture. vii

18 According to the Texas Almanac, Harris County is a highly industrialized county with manufacturing plants producing petroleum refining, chemical, food, fabricated metal products, nonelectric machinery, primary metals, scientific instruments, paper and allied products and printing and publishing. Harris County is also a corporate management center, a center of energy, space and medical research centers and a center of international business. Harris County contains the nation s largest concentration of petrochemical plants and the largest U.S. wheat exporting port which is among the top U. S. ports in value of foreign trade and total tonnage. The remaining portion of the District is located in Galveston County which is located on the Gulf Coast. Port activities dominate the economy but also included are insurance and finance centers, petrochemical plants, varied manufacturing, tourism, medical educational center, oceanographic research center, ship building, and commercial fishing. Galveston County had a 1990 United States Census population of 217,339 which grew to 250,158 in 2000, an increase of 15.10%. According to the Texas Almanac, Galveston, the county seat, is also the largest city with a population level of 57,247 and League City follows as the next largest city with a population of 45,444. Growth The District continues to experience significant residential growth and development. With enrollment increasing at a rate of more than 2.5% per year, Clear Creek ISD is one of the fastest growing school districts in the Houston metropolitan area. Many families are moving to our area for the excellent schools. Demographic projections currently indicate that Clear Creek ISD enrollment is expected to increase approximately 9,000 students over the next twelve years to 45,000 students. Clear Creek ISD is meeting the challenge of a fast growth school district by proactively analyzing facility needs and placing bond issues for taxpayer approval. Bonds were approved in 2000, resulting in three new elementary schools and two intermediate schools. This bond issue also included many capital upgrades, classroom additions as well as land sites for future schools. District taxpayers approved a $264 million bond program in February 2004 to accommodate growth and facility needs over a three year period. This bond is providing renovations at almost every campus, classroom additions, campus capital improvements, two new elementary schools, one new high school, and the complete rebuild of Clear Creek High School, a 50 year-old facility. In May 2007, District taxpayers approved a $183 million bond program to accommodate growth and facility needs over a three year period. This bond is providing funds to build two elementary schools, one intermediate school and one high school campus. In addition, the District plans on returning the two existing Ninth Grade Centers to intermediate campuses. Explosive growth forced the District to renovate these campuses from intermediate to high school campuses several years back. This bond is also providing classroom additions and renovations, roof and HVAC replacements, school buses for growth and replacement, and security enhancements. viii

19 Financial Information Accounting Systems The Board of Trustees maintains a system of accounting controls designed to assist the administration in meeting its responsibility for accurately reporting the financial condition of the District. The system is designed to provide reasonable assurance that assets are safeguarded against loss, theft, or misuse so activities can be recorded and transacted by the administration for the preparation of the District s financial statements in conformity with GAAP. Because the cost of internal controls should not outweigh their benefits, the District s comprehensive framework of internal controls has been designed to provide reasonable, rather than absolute, assurance that the financial statements will be free from material misstatement. The cost of operating the District s schools and the revenues to cover these costs are accounted for through the General Fund. Special programs funded by state or federal government grants designed to accomplish a particular objective are accounted for in Special Revenue Funds. Food service operations are accounted for in an Enterprise Fund. The District accounts for school construction financed by bond sales through the Capital Projects Fund. A specific portion of the tax rate is dedicated to payment of bond principal and interest. These transactions are recorded in the Debt Service Fund. The District has established Internal Service Funds to account for the transactions of its self-insured workers compensation, health insurance, short-term disability insurance, and property insurance plans. With the exception of the property insurance, income is derived primarily from charges to governmental funds based on employee salaries. Included in the CAFR as Agency Funds are financial schedules of student activity funds. Accounting for these funds is managed centrally by the Finance Department, using the same uniform accounting procedures and guidelines as the General Fund. The District s accounting records are maintained on a modified accrual basis for governmental fund types and a full accrual basis for the proprietary fund types as prescribed by Texas Education Agency Financial Accountability System Resource Guide (FASRG). Additionally, the District has prepared the Government-wide Financial Statements on the full accrual basis as required by Governmental Accounting Standards Board Statement No. 34. Financial data is submitted by the District to the Texas Education Agency through the Public Education Information Management System (PEIMS). The data is then analyzed, reviewed and presented to the State Board of Education. Budgetary Process State law requires that every local education agency in Texas prepare and file an annual budget of anticipated revenues and expenditures with the Texas Education Agency. The annual budget serves as the foundation for the District s financial planning and control. The process is instructionally driven and begins in November with a series of meetings to develop broad-based budget goals. The Chief Financial Officer facilitates a number of planning meetings with key District decision makers to develop a list of budget priorities for Board consideration. The Board receives budget priorities from the Superintendent s Cabinet, the District Educational Improvement Council (DEIC), the CFO Advisory Council (an advisory group of campus leaders throughout the District), and the Citizens Financial Advisory Committee (an advisory group of local business leaders). Each group develops budget priorities for Board consideration. ix

20 The final step in the District s budget goal-setting process is a planning meeting with the Board of Trustees in December. The Board reviews input from all sources and adopts the budget goals, assumptions and priorities that will drive budget development. Budget preparation begins with training sessions for campus leaders and program managers in February. The District uses site-based budgeting to enhance the ability of campus leaders to serve as effective instructional leaders. Site-based budgeting places the campus leader at the center of the budget preparation process. The site-based budget reflects the prioritized needs of the campus and coordinates with the Campus Improvement Plan and the District s Strategic Plan. All budget managers are required to submit requests for appropriations based on the priorities established by the Board of Trustees. After the completed campus and program budget packages have been returned to the Finance Department, a District Budget Committee reviews each department s budget requests with the responsible campus leader, program manager or department director. The review focuses on instructional impact and includes the allocation of existing funds as well as any additional funding requests. At these meetings, department/campus leaders are able to provide District staff with key information that is needed to make budget decisions. The Superintendent s Cabinet, comprised of District administrators, receives the draft budget and prioritizes budget requests and potential budget reductions based on the goals established by the Board. Throughout the entire budget process, the Board of Trustees receives budget updates that include revisions to the long range financial forecast, the preliminary budget, the compensation and salary plan, and the capital projects/capital improvement plan. If funds are available, the compensation and salary plan for teachers is adopted at the March Board meeting. Adopting the plan this early in the budget process provides Clear Creek ISD with a competitive advantage in recruiting new teachers and retaining existing staff. Since Clear Creek is a growing district, staff also asks the Board to approve a number of additional teaching positions at this time to accommodate student growth. The compensation and salary plan for support staff is generally adopted in July. The proposed budget must be adopted prior to the September 1 st fiscal year start date. The Board President must call a Board meeting for the purpose of discussing and adopting the budget and tax rate. A public notice of this meeting is required to be published at least 10 days, but not more than 30 days, prior to the public meeting. The District maintains budgetary controls throughout its financial systems. The objective of the budgetary controls is to ensure compliance with legal provisions embodied in the official budget adopted by the Board. The Board adopts an official budget for the general fund, debt service fund and the child nutrition fund. Budgetary control is maintained at the organizational level by the encumbrance of estimated purchase amounts prior to the release of purchase orders to vendors. Outstanding encumbrances at the end of the fiscal year are a reserve of fund balance and are treated as expenditures in the subsequent year upon receipt of the goods and services. Fund Balance Recognizing fund balance as key in maintaining a strong financial position, the Board policy regarding fund balance stipulates a goal of maintaining an adequate fund balance. The level of adequacy for the general fund unreserved fund balance is defined as 17% of the current budget, while the debt service fund is defined as 10% to 15% of the current year debt service requirements. x

21 Financial Planning There are several departmental plans which fold into the district s overall comprehensive plan. The district maintains a three-year Technology Plan, a three-year Compensation Plan, a Long Range Facility Master Plan, a Long Range Maintenance Plan (Clear Plan 2020) and a Long Range Academic Build Out Plan (Clear Way 2020). Resources for the accomplishment of these goals will be identified in each department s action plan and will be used in the development of multi-year forecasts. Estimated taxable values are a major factor in forecasting, as the District currently generates more than 57% of general fund revenue from local taxes. Other major factors used in developing these forecasts include number of students enrolled and in average daily attendance, salaries, insurance and cost of inflationary items such as utilities and fuel. Ultimately, these forecasts are prepared and reviewed several times a year and shared with the Board, staff, community and other stakeholders. Cash Management Policies And Practices It is the practice of the District to pursue an active cash management program which stresses safety of principal and interest while generating favorable rates of return. This program is maintained in such a fashion so as to provide a sufficient level of liquidity to support anticipated expenditures without subjecting the District to material, unfavorable fluctuations of market and interest rate risk. The District s investment policy minimizes risk while maintaining a competitive yield on its portfolio. Cash temporarily idle during the year was invested in money markets, obligations of the U.S. Treasury, commercial paper, and in the TexPool, Lone Star and MBIA investment pools. District deposits were entirely covered by Federal Deposit Insurance Corporation (FDIC) insurance, pledged collateral or corporate surety bonds for the fiscal year ended August 31, Furthermore, the District expedites the receipt of revenues via electronic transfer and the utilization of lockbox accounts and defers expenditures, when appropriate, to maintain maximum use of funds. The total amount of investment income earned by the District for the fiscal year ended August 31, 2007 was $11.6 million. Risk Management The District strives to maintain employee benefits programs designed to enhance the quality of life for its employees. To achieve this, the District offers fully funded insurance programs that provide medical, dental, vision and disability coverage along with other insured programs at competitive rates. The District also maintains adequate protection for property and casualty risk exposures through insured coverage and fully funded worker s compensation coverage with a strict emphasis on cost control of claims. The District s Risk Management Department strives to ensure the safety and health of students and employees through its accident prevention program, safety education program and safety inspections. Awards And Acknowledgments Financial Reporting Awards The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the District for its CAFR for the fiscal year ended August 31, This was the first time that the District prepared a CAFR and submitted for certification. In order to be awarded a Certificate of Achievement, a governmental unit must publish an easily readable and efficiently organized Comprehensive Annual Financial Report. The report must satisfy both accounting principles generally accepted in the United Sates of America and applicable legal requirements. xi

22 A Certificate of Achievement is valid for a period of one year only. We believe our current Comprehensive Annual Financial Report continues to meet the requirements of the Certificate of Achievement program and are submitting it to the GFOA to determine its eligibility for certification. The District was also awarded the Certificate of Excellence in Financial Reporting by the Association of School Business Officials International (ASBO) for its Comprehensive Annual Financial Report for the fiscal year ended August 31, This was the first time that the District submitted for certification. We believe the Comprehensive Annual Financial Report for the year ended August 31, 2007 continues to conform to the standards for which this award was granted. Additionally, the GFOA awarded a Distinguished Budget Presentation Award for the fiscal year beginning September 1, This award has been received for two consecutive years. In order to receive this award, the government published an easily readable and efficiently organized budget. This report satisfied both GAAP and applicable legal requirements. A Distinguished Budget Presentation Award is valid for a period of one year. We believe that our current budget continues to meet the program s requirements and has been submitted to the GFOA to determine its eligibility for another certificate. The TEA has awarded the District a rating of Superior Achievement for the year ended August 31, This is the fifth year of the State s new financial accountability rating system for school districts (School FIRST) and Clear Creek ISD has maintained the Superior Achievement rating for all five years. The rating is based upon an analysis of staff and student data reported for the school year and budgetary and actual financial data for the fiscal year ended August 31, Acknowledgements We appreciate the support of the Board, the residents of the District, and the business community, all who work cooperatively to ensure the best education for its students and the prudent development of the District. This cooperation is indicative of the strong support for the attainment of excellence in the District s educational programs. Also, we would like to express an appreciation to all employees of the District s schools for their interest and support in planning and conducting the financial affairs of the District in a responsible and progressive manner. Finally, a special thanks to the Finance Department for its diligence and dedicated service in helping prepare this report on a timely basis. Respectfully submitted, xii

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29 Financial Section 1

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31 2000 Loop 197 North, Suite 200 Texas City, TX (409) Fax (409) Greenway Plaza, Suite 1515 Houston, TX (713) th Street Galveston, TX (409) Independent Auditors' Report To the Board of Trustees Clear Creek Independent School District 2425 East Main Street League City, Texas We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information of Clear Creek Independent School District (the District ) as of and for the year ended August 31, 2007, which collectively comprise the District s basic financial statements as listed in the table of contents. These financial statements are the responsibility of the District s management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the District as of August 31, 2007, and the respective changes in financial position, and, where applicable, cash flows thereof, for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report dated January 24, 2008 on our consideration of the District s internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and important for assessing the results of our audit. 3

32 To the Board of Trustees Page 2 The management s discussion and analysis and budgetary comparison information as listed in the table of contents are not a required part of the basic financial statements but are supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the District s basic financial statements. The introductory section, combining and individual nonmajor fund financial statements, and statistical section are presented for the purpose of additional analysis and are not a required part of the basic financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations and is also not a required part of the basic financial statements of the District. The combining and individual nonmajor fund financial statements and the schedule of expenditures of federal awards, except for that portion marked unaudited on which we express no opinion, have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on them. NULL-LAIRSON, PC Texas City, Texas January 24,

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35 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT MANAGEMENT S DISCUSSION AND ANALYSIS As management of the Clear Creek Independent School District (the District ), we offer readers of the District s financial statements this narrative overview and analysis of the financial activities of the District for the fiscal year ended August 31, We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal, which can be found on pages v to x of this report. Financial Highlights The assets of the District exceeded its liabilities at the close of the fiscal year by $138,944,730 (net assets). Of this amount, $72,660,722 was invested in capital assets net of related debt, $4,074,173 was restricted for debt service, $1,711,904 was restricted for food service, $750,000 was restricted for special education, and $2,500,000 was restricted for disaster recovery and $55,210,860 in unrestricted net assets. The District s net assets increased by $16,782,664 as a result of this year s operations. The District s governmental funds reported combined ending fund balances of $165,844,288 as of August 31, Of this amount, $5,908,257 is designated for other purposes including $2,658,257 for long-term compensated absences, $750,000 for special education expenditures and $2,500,000 for disaster recovery. Fund balance of $114,164,771 is also reserved for 1) inventory in the amount of $916,616, 2) debt service in the amount of $4,225,838, 3) prepaid expenditures in the amount of $2,810,865, 4) encumbrances in the amount of $22,906,209, 5) construction in the amount of $82,848,702 and 6) other purposes in the amount of $456,541. The remaining amount in fund balance of $45,771,260 is available for spending at the government s discretion (unreserved, undesignated fund balance). The General Fund ended the year with an unreserved, undesignated fund balance of $43,761,535, an increase of $2,107,546 as compared to the prior fiscal year. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the District s basic financial statements. The District s basic financial statements comprise three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves, including schedules required by the state oversight agency, the Texas Education Agency (TEA). Government-Wide Financial Statements The focus of government-wide financial statements is on the overall financial position and activities of the District. The District s government-wide financial statements include the Statement of Net Assets and the Statement of Activities (on pages 19 to 21), which are prepared using accounting principles that are similar to commercial enterprises. These statements provide information about the activities of the District as a whole and present a longer-term view of the District's property and debt obligations and other financial matters. 7

36 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT MANAGEMENT S DISCUSSION AND ANALYSIS The Statement of Net Assets includes all the District's assets and liabilities at the end of the year, with the difference between the two reported as net assets. This difference is similar to the total owner s equity presented by a commercial enterprise. All of the District's assets are reported whether they serve the current year or future years. Liabilities are considered regardless of whether they must be paid in the current or future years. Although the purpose of the District is not to accumulate net assets, in general, as the amount increases, it may indicate that the financial position of the District is improving over time. To fully assess the overall health of the District, however, other factors should be considered as well, such as changes in the District's average daily attendance or its property tax base and the condition of the District's facilities. The purpose of the Statement of Activities is to present the revenues and expenses of the District. Again, the items presented on the Statement of Activities are measured in a manner similar to the approach used by a commercial enterprise in that revenues are recognized when earned or established criteria are satisfied and expenses are reported when incurred by the District. Thus, revenues are reported even when they may not be collected for several months or years after the end of the accounting period and expenses are recorded even though they may not have used cash during the current period. The District's revenues are divided into those provided by outside parties who share the costs of some programs, such as tuition received for summer school and grants provided by the U.S. Department of Education to assist children with disabilities or from disadvantaged backgrounds (program revenues), and revenues provided by the taxpayers or by TEA in the equalization funding processes (general revenues). Although the Statement of Activities looks different from a commercial enterprise income statement, the financial statement is different only in format, not substance. The District s business-type activities include the District s self-sustaining programs including Child Nutrition (National School Breakfast and Lunch) and Athletic Concessions. Business-type activities are intended to recover all or a significant portion of their costs through user fees and charges. The District does not have any component units for which it is financially accountable. Fund Financial Statements Fund financial statements (starting on page 22) report the District's operations in more detail than the government-wide statements by providing information about the District's most significant funds. For governmental activities, these statements tell how services were financed in the short term as well as resources remaining for future spending. They reflect the flow of current financial resources, and supply the basis for tax levies and the appropriations budget. For proprietary activities, fund financial statements tell how goods or services of the District were sold to employees, students and community members, and how the sales revenues covered the expenses of the goods or services. The remaining statements, fiduciary statements, provide financial information about activities for which the District acts solely as a trustee or agent for the benefit of those outside of the district. Laws and contracts require the District to establish some funds, such as grants received from the U.S. Department of Education. The District's administration establishes many other funds to help control and manage money for particular purposes (such as campus activities). 8

37 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT MANAGEMENT S DISCUSSION AND ANALYSIS All of the District s funds can be divided into three categories: governmental funds, proprietary funds and fiduciary funds. Governmental funds - Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government s near-term financing requirements. The focus of governmental funds is narrower than that of the governmentwide financial statements, therefore it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government s near-term financing decisions. Both the Governmental Fund Balance Sheet and the Governmental Fund Statement of Revenues, Expenditures, and Changes in Fund Balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The District maintains 48 governmental funds. Information is presented separately in fund financial statements for the general, debt service and capital projects funds, all of which are considered to be major funds. Data from the other governmental funds is combined into a single, aggregated presentation. Individual fund data for each of the nonmajor governmental funds is provided in the form of combining statements elsewhere in this report. The District adopts an annual appropriated budget for its general fund, debt service fund, and the child nutrition fund (An enterprise fund). A budgetary comparison schedule has been provided to demonstrate compliance with these budgets. Proprietary funds - Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. There are two proprietary fund types. Enterprise funds are used to report the same function presented as businesstype activities in the government-wide financial statements. The District has two business-type activities (enterprise funds), which consist of Child Nutrition (National School Breakfast and Lunch) and Athletic Concessions. The second type of proprietary fund is the internal service fund. Internal service funds are an accounting device used to accumulate and allocate costs internally among the various functions. The District has four internal service funds, which consist of the Employee Health Insurance fund, the Workers Compensation Insurance fund, the Disability Insurance fund and the Property Insurance fund. The basic proprietary fund financial statements can be found on pages 29 to 31 of this report. Fiduciary funds - Fiduciary funds are used to account for resources held for the benefit of parties outside the government. The District is the trustee, or fiduciary, for money raised by student activities. All of the District s fiduciary activities are reported in a separate Statements of Fiduciary Assets and Liabilities on page 32. We exclude these resources from the District s other financial statements because the District cannot use these assets to finance its operations. The District is only responsible for ensuring that the assets reported in these funds are used for their intended purposes. 9

38 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT MANAGEMENT S DISCUSSION AND ANALYSIS Notes to the Financial Statements The notes to the financial statements (starting on page 33) provide narrative explanations or additional data needed for full disclosure in the government-wide and fund financial statements. Other Information In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information that further explains and supports the information in the financial statements. The District has presented the general fund budget to actual comparisons in the supplementary information found on pages 70 to 71 of this report. The combining statements referred to earlier in connection with nonmajor governmental funds are presented immediately following the required supplementary information. Combining statements can be found on pages 78 to 101 and 107 to 113 of this report. Government-Wide Financial Analysis The government-wide financial statements for the District s overall financial position and operations for the fiscal years August 31, 2007 and August 31, 2006 are summarized as follows, based on the information included in the government-wide financial statements. The District s total assets exceeded total liabilities by $138,944,730 as of August 31, 2007, an increase of $16,782,664 over August 31, The District s total unrestricted net assets, which are the total net assets of the District reduced by restricted net assets of $11,073,148 and net assets invested in capital assets of $72,660,722, totaled $55,210,860 on August 31, Table I - Net Assets Summary Governmental Activities Business-Type Activites Totals Current and other assets $ 215,285,379 $ 219,418,567 $ 2,306,384 $ 2,388,886 $ 217,591,763 $ 221,807,453 Capital and non current assets 532,515, ,898,198 1,070, , ,586, ,468,023 Total Assets 747,801, ,316,765 3,377,120 2,958, ,178, ,275,476 Current liabilities 29,301,208 34,597, , ,643 29,745,107 35,198,795 Long term liabilities 582,488, ,914, ,488, ,914,615 Total Liabilities 611,789, ,511, , , ,233, ,113,410 Net Assets Invested in capital assets net of related debt 71,589,986 16,425,310 1,070, ,825 72,660,722 16,995,135 Restricted 9,361,244 47,292,524 1,711,904 1,627,328 11,073,148 48,919,852 Unrestricted 55,060,279 56,087, , ,915 55,210,860 56,247,079 Total Net Assets $ 136,011,509 $ 119,804,998 $ 2,933,221 $ 2,357,068 $ 138,944,730 $ 122,162,066 Investment in capital assets (e.g. land, buildings, furniture and equipment) less any related debt used to acquire those assets that is still outstanding is $72,660,722 as of August 31, Although the District s investment in its capital assets is reported net of related debt (net of any unspent bond proceeds), it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. An additional portion of the District s net assets (approximately 8 percent) represents resources that are subject to external restrictions on how they may be used, primarily funds to be used for the extinguishment of debt. The remaining balance of unrestricted net assets is $55,210,860, which represents amounts available for the District to meet on-going obligations. 10

39 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT MANAGEMENT S DISCUSSION AND ANALYSIS As shown in Table II, the net assets of the District's governmental activities increased $16,206,511 for the year ending August 31, The total cost of all governmental activities this year was $288,881,329, an increase of $16,239,634 over the previous year, resulting from growth in enrollment and staffing, as well as inflationary factors. The amended budget included inflationary increases such as a 3.5% increase in salaries, a 22% increase for utilities, a 10% increase for fuel and a 67% increase for insurance. The amount that the District s taxpayers paid for governmental activities through property taxes was $210,879,647 or 69 percent. State funding of $54,161,494 and federal and state grants and contributions of $22,515,267 accounted for 25 percent of the resources used to cover expenses, with the remainder of $17,531,432 from user charges, interest and other income. Table II - Change in Net Assets Governmental Activities Business-Type Activites Totals Revenues Program Revenues: Charges for services $ 5,699,172 $ 5,397,442 $ 7,399,642 $ 7,312,998 $ 13,098,814 $ 12,710,440 Operating grants 22,515,267 28,965,039 3,110,564 2,920,514 25,625,831 31,885,553 General Revenues: Property taxes 210,879, ,770, ,879, ,770,478 State Aid - Formula Grants 54,161,494 31,828,105 54,161,494 31,828,105 Grants and contributions not restricted 113,352 49,594 15, ,352 64,594 Interest earnings 11,373,275 10,717, ,950 78,155 11,526,225 10,796,013 Other 345, , , ,223 Total Revenues 305,087, ,938,739 10,663,156 10,326, ,750, ,265,406 Expenses Instruction 158,776, ,777, ,776, ,777,860 Instructional resources and media 4,496,393 4,271,647 4,496,393 4,271,647 services Curriculum and staff development 4,223,454 4,059,134 4,223,454 4,059,134 Instructional leadership 2,560,644 2,240,055 2,560,644 2,240,055 School leadership 14,543,396 13,482,018 14,543,396 13,482,018 Guidance, counseling, and evaluation 9,235,319 8,527,125 9,235,319 8,527,125 services Social work services 363, , , ,510 Health services 2,354,294 2,323,136 2,354,294 2,323,136 Student transportation 8,281,296 8,190,311 8,281,296 8,190,311 Food service 367, , , ,798 Extracurricular activities 8,275,702 7,556,005 8,275,702 7,556,005 General administration 7,977,884 7,364,736 7,977,884 7,364,736 Plant, maintenance and operations 31,436,161 26,636,699 31,436,161 26,636,699 Security and monitoring services 2,210,648 1,912,352 2,210,648 1,912,352 Data processing services 4,193,126 4,329,087 4,193,126 4,329,087 Community services 474, , , ,454 Interest on long-term debt 27,101,812 26,449,372 27,101,812 26,449,372 Debt issuance costs and fees 20,559 7,500 20,559 7,500 Facilities acquisition and construction 381,582 1,022, ,582 1,022,684 Payments related to shared services 502, , , ,530 arrangements Payments to Juvenile Justice Alternative 102,381 13, ,381 13,713 Education Programs Payments to Tax Increment Fund 1,002, ,969 1,002, ,969 National School Breakfast and Lunch 9,997,102 9,668,104 9,997,102 9,668,104 Athletic Concessions 89,901 54,896 89,901 54,896 Total Expenses 288,881, ,641,695 10,087,003 9,723, ,968, ,364,695 Excess (deficiency) before special items and transfers 16,206,511 12,297, , ,667 16,782,664 12,900,711 Special items 34,354 34,354 Transfers (66,920) 66,920 Increase (Decrease) in Net Assets 16,206,511 12,264, , ,587 16,782,664 12,935,065 Net Assets - Beginning 119,804, ,540,520 2,357,068 1,686, ,162, ,227,001 Net Assets - Ending $ 136,011,509 $ 119,804,998 $ 2,933,221 $ 2,357,068 $ 138,944,730 $ 122,162,066 11

40 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT MANAGEMENT S DISCUSSION AND ANALYSIS The District decreased the combined property tax rate from $1.775 to $1.630 per $100 of assessed value, and the assessed values increased approximately 9.2 percent to a total assessed valuation of $12.66 billion. This resulted in a tax levy of approximately $206.3 million in 2007, an increase of $0.16 million over the 2006 fiscal year. Total expenses above include depreciation of $22,974,534. Capital outlay of $64,640,184 is not included in the above total expenses. In the government-wide financial statements, capital outlay is shown as an increase in the capital assets reported on the Statement of Net Assets and depreciation expense is reported in the Statement of Activities in order to spread the recognition of the cost of capital assets over their useful lives. Net assets of the District's business-type activities increased $576,153 for the year ending August 31, Financial Analysis of the District s Funds As noted earlier, the District uses fund accounting to ensure and demonstrate compliance with financerelated legal requirements. The focus of the District s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the District s financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government s net resources available for spending at the end of the fiscal year. As of the end of the current fiscal year, August 31, 2007, the District s governmental funds reported: Combined ending fund balances of $165,844,288, a decrease of $1,526,211 over the year ended August 31, This decrease resulted primarily from the expenditure of funds in the capital projects fund netted with proceeds from the issuance of long-term debt. Approximately 28% of ending fund balance ($45,771,260) constitutes unreserved, undesignated fund balance. The remainder of fund balance is reserved or designated to indicate that it is not available for new spending because it has already been reserved or designated as follows: (1) Reserved for inventory - $916,616 (2) Reserved for debt service - $4,225,838 (3) Reserved for prepaid expenditures - $2,810,865 (4) Reserved for purchase orders of the prior period - $22,906,209 (5) Reserved for construction - $82,848,702 (6) Reserved for other purposes including Indirect Costs and Music Enrichment - $456,541 (6) Designated for long-term compensated absences - $2,658,257 (7) Designated for Special Education expenditures - $750,000 (8) Designated for disaster recovery - $2,500,000 12

41 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT MANAGEMENT S DISCUSSION AND ANALYSIS The general fund is the primary operating fund of the District. At the end of the current fiscal year, unreserved, undesignated fund balance of the general fund was $43,761,535 while the total fund balance was $53,491,946. During the current fiscal year, the fund balance of the general fund increased by $2,218,781. Key factors related to this change are as follows: Tax revenues decreased $6.0 million over the previous fiscal year resulting from a 11.3% decrease in the property tax rate. State funding increased $21.5 million due to an increase in enrollment and changes in the state funding formula as a result of recent legislation. The majority of the District s expenditures are for personnel costs. Personnel costs increased during the current fiscal year due to a 3% across the board salary increase for teachers and all other employees; and, for additional staff hired as a result of population growth and students relocated by the hurricanes. The debt service fund has a total fund balance of $4,225,838, all of which is reserved for the payment of debt. The net increase in the fund balance during the period in the debt service fund was $214,543. The capital projects fund is used to account for financial resources to be used for the construction and renovation of District facilities. The fund balance of the District s capital projects fund was $105,660,238 on August 31, 2007, $22,811,536 of which is reserved for encumbrances. The capital projects fund began the year with $111,563,926 in fund balance as a result of unspent bond proceeds in previous years. The District had expenditures in the capital projects fund of $65,455,829 in the current year. The remaining capital projects fund balance of $82,848,702 is reserved for future construction projects. General Fund Budgetary Highlights Over the course of the year, District administration recommended, and the Board of Trustees approved, several revisions to budgeted revenue and appropriations. Revisions to the revenue budget are necessary due to changes in estimates for local and state revenue based on updated information concerning student attendance and tax collections. Revisions to appropriations are necessary due to staffing adjustments based on actual enrollment, changes in spending needs over the course of the year and other unexpected occurrences. The District s major budget amendments during the year are summarized as follows: The revenue budget was increased by approximately $1.9 million due to: o o $1.8 million from higher than expected investment earnings resulting from increased interest rates and increased fund balance. $0.1 million from higher than expected tax collections within a tax increment reinvestment zone.. 13

42 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT MANAGEMENT S DISCUSSION AND ANALYSIS The expenditure budget was increased by a net of approximately $2.1 million due to: o o o $1.4 million for increased property insurance costs. $0.6 million for increased instructional supplies and security costs. $0.1 million for increased costs associated with a tax increment reinvestment zone.. The operating transfers out were increased by a net of approximately $15 million due to: o Transfers needed to the capital replacement project fund to cover planned projects. Capital Asset and Debt Administration Capital Assets At the end of fiscal year 2007, the District had $533.6 million (net of accumulated depreciation of $193.0 million) invested in a broad range of capital assets, including facilities and equipment for instruction, transportation, athletics, administration, and maintenance. Table III - Capital Asset Summary Governmental Activities Business-Type Activites Totals Land $ 58,183,426 $ 58,183,426 $ $ $ 58,183,426 $ 58,183,426 Land imporvements 20,062,939 15,449,914 20,062,939 15,449,914 Buildings and improvements 549,810, ,441, ,535 17, ,936, ,459,219 Furniture and equipment 80,777,511 67,829,534 1,094, ,578 81,872,393 68,576,112 Leased assets under capital lease Construction in progress 16,564,482 79,460,451 16,564,482 79,460,451 Total 725,398, ,365,251 1,221, , ,619, ,129,122 Accumulated depreciation (192,882,390) (170,467,053) (150,681) (194,046) (193,033,071) (170,661,099) Net capital assets $ 532,515,982 $ 490,898,198 $ 1,070,736 $ 569,825 $ 533,586,718 $ 491,468,023 Additional information on the District s capital assets can be found in Note 8 on pages 52 and 53 of this report. Significant capital asset activity during the year included the following: Clear Creek High School construction and improvements totaling more than $14.4 million. Clear Lake High School improvements totaling more than $3.2 million. Clear Brook High School improvements totaling more than $2.3 million. Clear Springs High School Construction totaling more than $20.1 million. Seabrook Intermediate improvements totaling more than $2.0 million. Clear Lake Intermediate improvements totaling more than $1.4 million. Robinson Elementary construction totaling more than $1.0 million. Technology improvements totaling more than $2.9 million. 14

43 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT MANAGEMENT S DISCUSSION AND ANALYSIS Debt Debt-management policies seek to provide the most favorable climate for District debt projects while upholding the highest rating possible for debt instruments. Management policies include the following points: All debt service obligations will be met when due. Long-term financing will be restricted to capital projects and purchases of related equipment. Long-term bonds will not be issued to finance current operations. The District will cooperate and communicate with bond-rating agencies and work toward obtaining the most favorable municipal bond rating possible. Outstanding obligations will be reviewed frequently to ensure the most favorable funding structure for the District. All necessary information and material regarding the District s financial status will be provided to the appropriate parties. The ratio of net general bonded debt to assessed valuation is a useful indicator of the District s debt position. This data is presented in the schedule Ratios of Net General Obligation Bonded Debt Outstanding in the statistical section and reflects a decrease in the ratio of net bonded debt to assessed value of 3.49%, as compared to 3.6% last year. At year-end, the District had $579,196,318 in bonds outstanding including accreted interest on capital appreciation bonds, deferred loss on refunding bonds, and premiums on bonds at issuance. The District continues to enjoy excellent underlying bond ratings. The AAA long-term rating on the District s bonds reflects the Texas Permanent School fund guarantee. The underlying rating on the District s bonds is Aaa from Moody s, AAA from Standard and Poor s, and AAA from Fitch Ratings. At August 31, 2007 the District had no remaining un-issued authorized bonds. More detailed information about the District's long-term liabilities is presented in Note 9 to the financial statements. Table IV District s Outstanding Debt Governmental Activities General obligation bonds $ 563,085,000 $ 539,685,000 Less deferred amounts: For issuance premiums/discounts 21,159,418 21,802,646 Gain or (loss) on refunding bonds (18,002,227) (20,543,758) Accreted interest on premium compound interest bonds 12,954,127 11,953,896 $ 579,196,318 $ 552,897,784 15

44 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT MANAGEMENT S DISCUSSION AND ANALYSIS Economic Factors and Next Year's Budgets and Rates Economic factors can have a significant impact on the District s finances. The average unemployment rate for Harris and Galveston counties are 4.2% and 4.5%, respectively, while the state and national averages are 4.3% and 4.6%, respectively. Increases in the unemployment rate could result in a reduction in the District s tax collections. Inflationary trends in the region tend to be somewhat lower than the national consumer price index (CPI). In general, this positive factor helps the District keep costs low. However, two specific trends have required significant increases in school district expenditures. First, the teacher shortage in this area has mandated significant salary and benefit increases as districts attempt to attract and retain qualified personnel. Second, inflation and other external factors have resulted in budget increases for property insurance, electricity and fuel. The District's elected and appointed officials considered many factors when setting the fiscal year general fund budget and tax rate. The adopted budget is based on the following significant assumptions: The District s enrollment was projected to increase by 2.8% or approximately 930 students at the time the budget was adopted. General fund expenditures are budgeted to increase by approximately $15.1 million from the original budget. Major factors that resulted in this increase include: o salary increases of 3.5% for all staff for a total increase of $5.7 million. o Benefit increases of $2.1 million. o New positions needed to accommodate student growth, new campuses and new programs of $9.2 million. o New initiatives and programs of $.8 million. o Energy and fuel increases of $.7 million. o Property and casualty insurance premium increases of $.6 million. o Operational and capital replacement cost reductions of $4.0 million. Requests for Information This financial report is designed to provide our citizens, taxpayers, customers, investors and creditors with a general overview of the District's finances and to show the District's accountability for the money it receives. Questions concerning any of the information provided in this report or requests for additional information should be addressed to the Chief Financial Officer, Clear Creek Independent School District, 2425 East Main Street, League City, Texas,

45 Basic Financial Statements 17

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47 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT Exhibit A-1 STATEMENT OF NET ASSETS August 31, 2007 Data Control Codes Governmental Activities Business-type Activities Total Assets 1110 Cash and cash equivalents $ 152,691,415 $ 2,368,794 $ 155,060, Current investments 34,939,836 34,939, Property taxes receivables, net 7,280,741 7,280, Due from other governments 11,367,503 56,094 11,423, Accrued interest 560, , Internal balances 160,823 (160,823) 1290 Other receivables, net 409, , Inventories 916, , Deferred expenses 3,079,954 42,319 3,122, Capital bond and other debt issuance costs 3,878,516 3,878,516 Capital assets not subject to depreciation: 1510 Land 58,183,426 58,183, Construction in progress 16,564,482 16,564,482 Capital assets net of depreciation: 1520 Buildings and improvements, net 414,883, , ,008, Furniture and equipment, net 42,885, ,694 43,830, Total Assets 747,801,361 3,377, ,178,481 Liabilities 2110 Accounts payable 14,078, ,725 14,370, Interest payable 1,246,329 1,246, Payroll deductions and withholdings 29,216 29, Accrued wages payable 8,551, ,174 8,703, Due to fiduciary funds 1,310 1, Due to other governments 1,372 1, Due to student groups 133, , Accrued expenses 3,125,468 3,125, Unearned revenue 2,133,639 2,133,639 Noncurrent Liabilities: 2501 Due within one year 15,554,069 15,554, Due in more than one year 566,934, ,934, Total Liabilities 611,789, , ,233,751 Net Assets 3200 Invested in capital assets, net of related debt 71,589,986 1,070,736 72,660,722 Restricted for: 3820 Federal and state programs 27,346 27, Food service 1,711,904 1,711, Debt service 4,074,173 4,074, Campus activity 2,009,725 2,009, Other Purposes 3,250,000 3,250, Unrestricted 55,060, ,581 55,210,860 Total net assets $ 136,011,509 $ 2,933,221 $ 138,944,730 See Notes to Financial Statements 19

48 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT STATEMENT OF ACTIVITIES For the Year Ended August 31, 2007 Data Control Codes Functions/Programs Expenses Governmental activities: 11 Instruction 158,776,037 Charges for Services Operating Grants and Contributions $ $ 1,447,355 $ 13,924, Instructional resources and media services 4,496, , Curriculum and staff development 4,223,454 13,374 1,294, Instructional leadership 2,560, , , School leadership 14,543, , Guidance, counseling, and evaluation services 9,235,319 83,614 1,655, Social work services 363,705 30, Health services 2,354, , Student transportation 8,281,296 2,215, Food service 367, Extracurricular activities 8,275,702 3,588, , General administration 7,977, , Plant, maintenance and operations 31,436, , , Security and monitoring services 2,210,648 18, Data processing services 4,193, , Community services 474,027 2, , Interest on long-term debt 27,101, Debt issuance costs and fees 20, Facilities acquisition and construction 381, Payments related to shared services arrangements 502, Payments to Juvenile Justice Alternative Education 102, Payments to Tax Increment Fund 1,002,481 TG Total governmental activities 288,881,329 5,699,172 22,515,267 Business-type activities 35 National School Breakfast and Lunch 9,997,102 7,319,075 3,110, Athletic Concessions 89,901 80,567 TB Total business-type activities 10,087,003 7,399,642 3,110,564 TP Total primary government $ 298,968,332 $ 13,098,814 $ 25,625,831 See Notes to Financial Statements Data Control Codes MT DT SF GC IE MI TR CN NB PA NE General revenues: Taxes: Property taxes, levied for general purposes Property taxes, levied for debt service State-aid formula grants not restricted Grants and contributions not restricted Investment earnings Miscellaneous Total general revenues, special items, and transfers Change in net assets Net assets - beginning Prior period adjustments Net assets - ending Program Revenue 20

49 Exhibit B-1 Net (Expense) Revenue and Changes in Net Assets Primary Government Governmental Activities Business-type Activities Total $ (143,404,211) $ $ (143,404,211) (4,321,144) (4,321,144) (2,915,508) (2,915,508) (1,968,282) (1,968,282) (13,794,171) (13,794,171) (7,496,496) (7,496,496) (333,010) (333,010) (1,862,197) (1,862,197) (6,066,225) (6,066,225) (367,913) (367,913) (4,363,585) (4,363,585) (7,769,761) (7,769,761) (30,545,323) (30,545,323) (2,192,056) (2,192,056) (4,016,177) (4,016,177) (139,501) (139,501) (27,101,812) (27,101,812) (20,559) (20,559) (381,582) (381,582) (502,515) (502,515) (102,381) (102,381) (1,002,481) (1,002,481) (260,666,890) (260,666,890) 432, ,537 (9,334) (9,334) 423, ,203 (260,666,890) 423,203 (260,243,687) 172,222, ,222,153 38,657,494 38,657,494 54,161,494 54,161, , ,352 11,373, ,950 11,526, , , ,873, , ,026,351 16,206, ,153 16,782, ,751,602 2,357, ,108,670 2,053,396 2,053,396 $ 136,011,509 $ 2,933,221 $ 138,944,730 21

50 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT BALANCE SHEET GOVERNMENTAL FUNDS August 31, 2007 Data Control Codes General Fund Debt Service Fund Capital Projects Assets 1110 Cash and temporary investments $ 31,701,230 $ 4,990,701 $ 99,681, Investments 34,939,836 Receivables: 1220 Property taxes - delinquent 7,255,223 1,310, Allowance for uncollectible taxes (credit) (1,088,283) (196,553) 1240 Receivables from other governments 10,535, Accrued interest 560, Due from other funds 31,863 15,000, Other receivables 6, , Inventories, at cost 916, Prepaid items 2,810, Total Assets $ 87,638,060 $ 6,136,365 $ 114,857,285 Liabilities and Fund Balance Liabilities: 2110 Accounts payable $ 3,791,505 $ $ 9,197, Interest payable 116, Payroll deduction and withholdings payable 29, Accrued wages payable 8,466, Due to other funds 15,536, Payable to other governments 1, Due to student and employee groups 133, Accrued expenses 634, Deferred revenues 5,552,521 1,793, Total Liabilities 34,146,114 1,910,527 9,197,047 Fund Balance: Reserved for: 3410 Investments in inventories 916, Retirement of funded indebtedness 4,225, Prepaid items 2,810, Encumbrances 94,673 22,811, Construction 82,848, Other purposes Unreserved, Designated for: 3590 Other purposes 5,908,257 Unreserved, Undesignated Reported in: 3600 General fund 43,761, Special revenue funds 3640 Debt service 3000 Total fund balances 53,491,946 4,225, ,660, Total Liabilities and Fund Balances $ 87,638,060 $ 6,136,365 $ 114,857,285 See Notes to Financial Statements. 22

51 Exhibit C-1 Other Governmental Funds Total Governmental Funds $ 3,535,662 $ 139,908,755 34,939,836 8,565,577 (1,284,836) 831,619 11,367, , ,241 15,473, , , ,616 2,810,865 $ 4,935,685 $ 213,567,395 $ 626,225 $ 13,614, ,543 29,216 84,138 8,551, ,241 15,977, , , ,069 1,317,776 8,664,281 2,469,419 47,723, ,616 4,225,838 2,810,865 22,906,209 82,848, , ,541 5,908,257 43,761,535 2,009,725 2,009,725 2,466, ,844,288 $ 4,935,685 $ 213,567,395 23

52 (This page intentionally left blank.) 24

53 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT Exhibit C-2 RECONCILIATION OF BALANCE SHEET FOR GOVERNMENTAL FUNDS TO THE STATEMENT OF NET ASSETS August 31, 2007 Data Control Codes Total fund balance, governmental funds (from C-1) $ 165,844,288 Amounts reported for governmental activities in the statement of net assets (A-1) are different because: 1 Capital assets used in governmental activities are not financial resources and therefore are not reported as assets in governmental funds. Capital assets at historical cost, net of accumulated depreciation, where applicable. 532,515,982 2 Property taxes receivable have been levied and are due this year, but are not available soon enough to pay for the current period's expenditures, these property taxes (net of allowance for uncollectible accounts) are deferred in the fund financial statements. 6,530,642 3 Bond issuance costs are not financial resources and, therefore, are not reported as assets in governmental funds. These costs are to be amortized over the life of the bonds. 3,878,516 Long-term liabilities, including bonds payable, are not due and payable in the current period, and therefore are not reported as liabilities in the funds. Longterm liabilities at year end consist of: 4 General obligation bonds (563,085,000) 5 Premiums on issuance (21,159,418) 6 Deferred loss on refunding 18,002,227 7 Accreted interest on premium compound interest bonds (12,954,127) 8 Accrued compensated absences (2,658,257) 9 Accrued interest payable (1,129,786) 10 Addition of Internal Service Fund net assets. 10,226,442 Total net assets - governmental activities $ 136,011,509 See Notes to Financial Statements. 25

54 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - GOVERNMENTAL FUNDS For the Year Ended August 31, 2007 Data Control Codes General Fund Debt Service Fund Capital Projects Revenues 5700 Local, intermediate, and out-of-state $ 176,707,325 $ 38,793,335 $ 4,831, State program revenues 62,306, Federal program revenues 659, Total revenues 239,673,883 38,793,335 4,831,501 Expenditures Current: 0011 Instruction 134,763,336 18, Instruction resources and media services 4,088, Curriculum and instructional staff development 2,174, Instructional leadership 1,858, School leadership 13,090, Guidance, counseling and evaluation services 7,049, Social work services 145, Health services 2,098, Student transportation 8,347,774 36, Food services 279, , Extracurricular activities 4,582,026 6, General administration 7,048,551 31, Plant maintenance and operations 27,291,523 2,817, Security and monitoring services 1,800, , Data processing services 3,984, Community services 133,960 Debt service: 0071 Principal on long-term debt 13,735, Interest on long-term debt 24,843, Bond issuance costs and fees 404,408 Capital outlay: 0081 Facilities acquisition and construction 61,746,702 Intergovernmental: 0093 Payments related to shared services arrangements 502, Payments to Juvenile Justice Alt. Ed. Prgm. 102, Payments to tax increment fund 1,002, Total Expenditures 220,344,156 38,578,792 65,455, Excess (deficiency) of revenues over expenditures 19,329, ,543 (60,624,328) Other Financing Sources (Uses) 7911 Capital-related debt issued (regular bonds) 37,135, Sale of real or personal property 5, Transfers in 17,000, Premium or discount on issuance of bonds 585, Transfers out (17,116,355) 7080 Total other financing sources and uses (17,110,946) 54,720, Net change in fund balances 2,218, ,543 (5,903,688) 0100 Fund Balance - September 1 (Beginning) 51,273,165 4,011, ,563,926 Prior period adjustment 3000 Fund Balance - August 31 (Ending) $ 53,491,946 $ 4,225,838 $ 105,660,238 See Notes to Financial Statements. 26

55 Exhibit C-3 Other Governmental Funds Total Governmental Funds $ 4,686,277 $ 225,018,438 4,584,526 66,891,490 9,098,920 9,758,514 18,369, ,668,442 10,453, ,235, ,088,796 1,822,024 3,996, ,102 2,369, ,944 13,209,344 1,461,820 8,511, , ,814 42,076 2,140,439 64,968 8,449, ,083 3,413,351 8,001, ,356 7,248,738 8,343 30,116,882 2,042,964 3,984, , ,466 13,735,000 24,843, ,408 61,746, , ,381 1,002,481 18,595, ,974,098 (225,598) (41,305,656) 37,135,000 5, ,355 17,116, ,640 (17,116,355) 116,355 37,726,049 (109,243) (3,579,607) 522, ,370,499 2,053,396 2,053,396 $ 2,466,266 $ 165,844,288 27

56 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT Exhibit C-4 RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES For the Year Ended August 31, 2007 Data Control Codes Net change in fund balances - total governmental funds (from C-3) $ (3,579,607) Amounts reported for governmental activities in the statement of activities (B-1) are different because: Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives as depreciation expense. 1 Governmental funds capital outlays 64,640,184 2 Governmental activities depreciation expense (22,892,530) 3 Governmental funds report the entire net sales price (proceeds) from sale of an asset as revenue because it provides current financial resources. In contrast, the Statement of Activities reports only the gain on the sale of the assets. Thus, the change in net assets differs from the change in fund balance by the cost of the asset sold. (129,870) 4 Property tax revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. 3,277,982 5 Repayment of bond principal is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the statement of net assets. 13,735,000 6 Proceeds from issuance of long-term debt is reported as an other financing source in the governmental funds. In the government-wide financial statements, proceeds are treated as an increase in long-term liabilities and amounts paid to refunding agents are treated as a decrease in long-term liabilities. (37,720,640) 7 Bond issuance costs paid during the current year will be amortized over the life of the bonds. 404,408 Some expenses reported in the statement of activities do not require the use of current financial resources and these are not reported as expenditures in governmental funds: 8 Increase in interest payable not recognized in fund statements 263,609 9 Decrease in long-term portion of accrued compensated absences (237,171) 10 Accreted interest on capital appreciation bonds and amortization of bond issuance costs (1,000,231) 11 Amortization of deferred charges including bond issuance costs as well as premiums and discounts on issuance of bonds (1,541,957) 12 Internal service funds are used by management to charge the costs of certain activities, such as insurance and printing, to individual funds. The net revenue (expense) of the internal service funds is reported as governmental activities. 987,334 Change in net assets of governmental activities (see B-1) $ 16,206,511 See Notes to Financial Statements. 28

57 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT Exhibit D-1 STATEMENT OF NET ASSETS PROPRIETARY FUNDS August 31, 2007 Business-type Activities - Enterprise Funds Assets Current Assets: Cash and cash equivalents 2,368,794 Governmental Activities - Internal Service Funds $ $ 12,782,660 Receivables: Due from other governments 56,094 Due from other funds 664,290 Other receivables 100,000 Other current assets 42, ,089 Total current assets 2,467,207 13,816,039 Land, Buildings and Equipment: Building and improvements 126,535 Furniture and equipment 1,094,882 Accumulated depreciation - Buildings (1,493) Accumulated depreciation - Furniture and Equipment (149,188) Total non-current assets 1,070,736 Total Assets 3,537,943 13,816,039 Liabilities Current Liabilities: Accounts payable 291, ,129 Accrued wages payable 152,174 Due to other funds 160,823 Accrued expenses 3,125,468 Total current liabilities 604,722 3,589,597 Total Liabilities 604,722 3,589,597 Net Assets Investments in capital Assets, net of debt 1,070,736 Restricted for food service 1,718,008 Unrestricted net assets 144,477 10,226,443 Total Net Assets $ 2,933,221 $ 10,226,443 See notes to financial statements 29

58 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT Exhibit D-2 STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS PROPRIETARY FUNDS For the Year Ended August 31, 2007 Business-type Activities - Enterprise Funds Governmental Activities - Internal Service Funds Operating Revenues Charges for Services $ 7,399,642 $ 25,907,004 State Program Revenues Total Operating Revenues 7,399,642 25,907,004 Operating Expenses Payroll costs 3,875,451 Purchased and contracted services 945,425 1,642,466 Supplies and materials 4,956,273 3,760 Other operating costs 201,028 Claims expense and other operating expenses 23,414,860 Depreciation 82,004 Total Operating Expenses 10,060,181 25,061,086 Operating Income (Loss) (2,660,539) 845,918 Non-Operating Revenues (Expenses) Investment earnings 152, ,416 National School Breakfast Program 597,523 National School Lunch Program 2,017,299 Donated Commodities 442,016 Operating grants and contributions 53,726 Miscellaneous expenses (26,822) Total Nonoperating Revenues (Expenses) 3,236, ,416 Change in Net Assets 576, ,334 Net Assets - September 1 (Beginning) 2,357,068 9,239,109 Net Assets - August 31 (Ending) $ 2,933,221 $ 10,226,443 See notes to financial statements 30

59 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT Exhibit D-3 STATEMENT OF CASH FLOWS PROPRIETARY FUNDS For The Year Ended August 31, 2007 Governmental Business-type Activities - Enterprise Funds Activities - Internal Service Funds Cash Flows from Operating Activities: Cash received from customers $ 7,399,642 $ 6,698,067 Cash receipts from interfund services provided 19,208,937 Cash payments for insurance claims (18,360,730) Cash payments to suppliers for goods and services (5,143,025) (6,487,155) Cash payments to employees (3,995,039) Net Cash Provided by (Used for) Operating Activities (1,738,422) 1,059,119 Cash Flows from Non-Capital Financing Activities: Advances from other funds 7,778,550 Advances to other funds (407,744) (310,758) Federal and state assistance - Food service and related 2,806,779 Net Cash Provided by (Used for) Non-Capital Financing Activities 2,399,035 7,467,792 Cash Flows from Capital and Related Financing Activities: Acquisition of capital assets (609,737) Net Cash Provided by (Used for) Capital and Related Financing Activities (609,737) Cash Flows from Investing Activities: Interest on investments 152, ,416 Net Cash Provided by Investing Activities 152, ,416 Net Increase in Cash and Cash Equivalents 203,826 8,668,327 Cash and Cash Equivalents at Beginning of Year 2,164,968 4,114,333 Cash and Cash Equivalents at End of Year $ 2,368,794 $ 12,782,660 Reconciliaiton of Operating Income to Net Cash Provided by Operating Activities: Operating Income (Loss) $ (2,660,539) $ 845,918 Adjustments to Reconcile Operating Income to Net Cash Provided by Operating Activities: Depreciation 82,004 Donated commodities 442,016 Change in Assets and Liabilities: Decrease (increase) in Receivables (100,000) Decrease (increase) in Deferred Expenses/Other Assets 555,841 (84,089) Increase (decrease) in Accounts Payable (38,156) 92,290 Increase (decrease) in Accrued Wages Payable (119,588) Increase (decrease) in Accrued Expenses 305,000 Net Cash Provided by (Used for) Operating Activities $ (1,738,422) $ 1,059,119 Supplemental information: Non-cash transaction - Donated commodities received $ 442,016 $ Total non-cash transactions $ 442,016 $ See notes to financial statements 31

60 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT Exhibit E-1 STATEMENT OF FIDUCIARY ASSETS AND LIABILITIES For the Year Ended August 31, 2007 Agency Fund Assets Cash and cash equivalents $ 1,153,291 Receivables: Due from primary government 1,310 Total Assets 1,154,601 Liabilities Accounts payable 28,758 Due to student groups 1,125,843 Total Liabilities $ 1,154,601 See notes to financial statements 32

61 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT Exhibit E-2 NOTES TO FINANCIAL STATEMENTS For The Year Ended August 31, 2007 Note 1 - Summary Of Significant Accounting Policies The Clear Creek Independent School District (the "District") is an independent public educational agency operating under applicable laws and regulations of the State of Texas. The District is autonomously governed by a seven-member Board of Trustees elected by the District's residents. The District prepares its basic financial statements in conformity with generally accepted accounting principles promulgated by the Governmental Accounting Standards Board (GASB) and other authoritative sources identified in Statement on Auditing Standards No. 69 of the American Institute of Certified Public Accountants; and it complies with the requirements of the appropriate version of Texas Education Agency's Financial Accountability System Resource Guide (the "Resource Guide" or FASRG ) and the requirements of contracts and grants of agencies from which it receives funds. The District s Financial Statements are in accordance with GASB Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments, GASB Statement No. 37, Basic Financial Statements and Management s Discussion and Analysis for State and Local Governments: Omnibus which provides additional guidance for the implementation of GASB No. 34, and GASB Statement No. 38 Certain Financial Statement Disclosures which changes the note disclosure requirements in the financial statements for governmental entities. GASB Statement No. 34 established a new financial reporting model for state and local governments that included the addition of management s discussion and analysis, government-wide financial statements, required supplementary information and the elimination of the effects of internal service activities and the use of account groups to the already required fund financial statements and notes. The GASB determined that fund accounting has and will continue to be essential in helping governments to achieve fiscal accountability and should, therefore, be retained. The GASB also determined that government-wide financial statements are needed to allow user s of financial reports to assess a government s operational accountability. The GASB 34 reporting model integrates fund-based financial reporting and government-wide financial reporting as complementary components of a single comprehensive financial reporting model. The following is a summary of the most significant accounting policies. A. Reporting Entity The District is considered an independent entity for financial reporting purposes and is considered a primary government. As required by generally accepted accounting principles, these basic financial statements have been prepared, based on considerations regarding the potential for inclusion of other entities, organizations, or functions, as part of the District s financial reporting entity. Based on these considerations, the District s basic financial statements do not include any other entities. Additionally, as the District is considered a primary government for financial reporting purposes, its activities are not considered a part of any other governmental or other type of reporting entity. 33

62 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT Exhibit E-2 NOTES TO FINANCIAL STATEMENTS (Continued) For The Year Ended August 31, 2007 Note 1 - Summary Of Significant Accounting Policies (continued) A. Reporting Entity (continued) Considerations regarding the potential for inclusion of other entities, organizations, or functions in the District s financial reporting entity are based on criteria prescribed by generally accepted accounting principles. These same criteria are evaluated in considering whether the District is part of any other governmental or other type of reporting entity. The overriding elements associated with prescribed criteria considered in determining that the District s financial reporting entity status is that of a primary government are: that it has a separately elected governing body; it is legally separate; and it is fiscally independent of other state and local governments. Additionally prescribed criteria under generally accepted accounting principles include considerations pertaining to organizations for which the primary government is financially accountable; and considerations pertaining to other organizations for which the nature and significance of their relationship with the primary government are such that exclusion would cause the reporting entity s financial statements to be misleading or incomplete. The Board of Trustees (the "Board") is elected by the public and has the authority to make decisions, appoint administrators and managers, and significantly influence operations. It also has the primary accountability for fiscal matters. Therefore, the District is a financial reporting entity as defined by the Governmental Accounting Standards Board (GASB) in its Statement No. 14, The Financial Reporting Entity. The District has also implemented GASB Statement No. 39, Determining Whether Certain Organizations are Component Units. The District receives support from various PTO, booster clubs and foundation organizations. None of these organizations meet the criteria specified by GASB 39 to be included in the District s financial statements. Therefore, there are no component units included within the reporting entity. B. Government-Wide and Fund Financial Statements The Statement of Net Assets and the Statement of Activities are government-wide financial statements. They report information on all of the Clear Creek Independent School District operating activities and activities other than the District s fiduciary (Agency-type) activities. For the most part, the effect of interfund activities has been removed from these statements. Governmental activities include programs supported primarily by taxes, State foundation funds, grants and other intergovernmental revenues. The District Business-type activities rely to a significant extent on fees and charges for support. The Statement of Activities demonstrates how other people or entities that participate in programs the District operates have shared in the payment of the direct costs. The "charges for services" column includes payments made by parties that purchase, use, or directly benefit from goods or services provided by a given function or segment of the District. Examples include tuition paid by students not residing in the district, school lunch charges, etc. The "Grants and Contributions" column includes amounts paid by organizations outside the District to help meet the operational or capital requirements of a given function. Examples include grants under the Elementary and Secondary Education Act (ESEA). If a revenue is not a program revenue, it is a general revenue used to support all of the District's functions. Taxes are always general revenues. 34

63 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT Exhibit E-2 NOTES TO FINANCIAL STATEMENTS (Continued) For The Year Ended August 31, 2007 Note 1 - Summary Of Significant Accounting Policies (continued) B. Government-Wide and Fund Financial Statements (continued) Interfund activities between governmental funds and between governmental funds and proprietary funds appear as Due To/Due From on the Governmental Fund Balance Sheet and Proprietary Fund Statement of Net Assets and as other resources and other uses on the governmental fund Statement of Revenues, Expenditures and Changes in Fund Balance and on the Proprietary Fund Statement of Revenues, Expenses and Changes in Fund Net Assets. All interfund transactions between governmental funds are eliminated on the government-wide statements. Interfund activities between governmental funds and enterprise funds remain on the government-wide statements and appear on the government-wide Statement of Net Assets as internal balances and on the Statement of Activities as interfund transfers. Interfund activities between governmental funds and fiduciary funds remain as due to/due from on the government-wide Statement of Activities. The fund financial statements provide reports on the financial condition and results of operations for three fund categories - governmental, proprietary, and fiduciary. Since the resources in the fiduciary funds cannot be used for District operations, they are not included in the government-wide statements. The District considers some governmental and enterprise funds to be major and reports their financial condition and results of operations in a separate column. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. All other revenues and expenses are nonoperating. C. Measurement Focus, Basis Of Accounting, and Financial Statement Presentation The government-wide financial statements use the economic resources measurement focus and the accrual basis of accounting, as do the proprietary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of the related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Governmental fund financial statements use the current financial resources measurement focus and the modified accrual basis of accounting. With this measurement focus, only current assets, current liabilities and fund balances are included on the balance sheet. Operating statements of these funds present net increases and decreases in current assets (i.e., revenues and other financing sources, and expenditures and other financing uses). The modified accrual basis of accounting recognizes revenues in the accounting period in which they become both measurable and available. It recognizes expenditures in the accounting period in which the fund liability is incurred, if measurable, except for unmatured interest and principal on long-term debt, which is recognized when due. The expenditures related to certain compensated absences and claims and judgments are recognized when the obligations are expected to be liquidated with expendable available financial resources. The District considers all revenues available if they are collectible within sixty days after year end. Note 1 - Summary Of Significant Accounting Policies (continued) C. Measurement Focus, Basis Of Accounting, and Financial Statement Presentation (continued) 35

64 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT Exhibit E-2 NOTES TO FINANCIAL STATEMENTS (Continued) For The Year Ended August 31, 2007 Revenues from local sources consist primarily of property taxes. Property tax revenues and revenues received from the State are recognized under the susceptible-to-accrual concept. Miscellaneous revenues are recorded as revenue when received in cash because they are generally not measurable until actually received. Investment earnings are recorded as earned, since they are both measurable and available. Grant funds are considered to be earned to the extent of expenditures made under the provisions of the grant. Accordingly, when such funds are received, they are recorded as deferred revenues until related and authorized expenditures have been made. If balances have not been expended by the end of the project period, grantors sometimes require the District to refund all or part of the unused amount. The Proprietary Fund Types are accounted for on a flow of economic resources measurement focus and utilize the accrual basis of accounting. This basis of accounting recognizes revenues in the accounting period in which they are earned and become measurable and expenses in the accounting period in which they are incurred and become measurable. The District applies all GASB pronouncements as well as the Financial Accounting Standards Board pronouncements issued on or before November 30, 1989, unless these pronouncements conflict or contradict GASB pronouncements. With this measurement focus, all assets and all liabilities associated with the operation of these funds are included on the fund Statement of Net Assets. The fund equity is segregated into invested in capital assets net of related debt, restricted net assets, and unrestricted net assets. When both restricted and unrestricted resources are available for use, it is the District s policy to use restricted resources first, then unrestricted resources as they are needed. As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. D. Fund Accounting The accounts of the District are organized on the basis of funds in accordance with the provisions of the Resource Guide. Each fund is considered to be a separate accounting entity. The operations of each fund are accounted for by providing a separate set of self-balancing accounts, which comprise its assets, liabilities, fund equity, revenues, and expenditures or expenses. For financial statement presentation, the District s fund financial statements provides more detailed information about the District's most significant funds-not the District as a whole. The funds shown on the Fund Financial Statements are considered major funds because of the size and activity of the funds in relation to all of the funds. 36

65 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT Exhibit E-2 NOTES TO FINANCIAL STATEMENTS (Continued) For The Year Ended August 31, 2007 Note 1 - Summary Of Significant Accounting Policies (continued) D. Fund Accounting (continued) The District reports the following major Governmental Funds: 1. General Fund The General Fund is the government s primary operating fund. It is used to account for all financial transactions not properly includable in other funds. The principal sources of revenues include local property taxes, state funding under the Foundation School Program, interest earnings on fund investments, and federal source revenues for indirect costs reimbursed by the programs accounted for in the Special Revenue Fund. Expenditures include all costs associated with the daily operations of the District except for specific programs funded by the federal or state government, food service, debt service and capital projects. 2. Debt Service Fund The Debt Service Fund is used to account for the payment of interest and principal on all bonds of the District. The primary sources of revenue for debt service are local property taxes. 3. Capital Projects Fund The Capital Projects Fund is used to account for the expenditures of resources accumulated from sales of bonds and related interest earnings for the renovation, acquisition and construction of school facilities. The District also reports the following governmental fund type under other governmental funds as nonmajor: 4. Special Revenue Fund The Special Revenue Fund is used to account for all financial resources restricted to, or designated for, specific purposes by a grantor. Specifically, this type of fund is used to account for federally financed programs (grants) where unused balances are returned to the grantor at the close of specified project periods and other revenue specific programs. Project accounting is employed to maintain integrity for the various sources of funds. Resources accounted for in these funds are awarded to the District for the purpose of accomplishing specific educational tasks as defined by grantors in contracts or other agreements. The Federal Award Section of the District s Annual Financial and Compliance Report identifies these individual grants. 37

66 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT Exhibit E-2 NOTES TO FINANCIAL STATEMENTS (Continued) For The Year Ended August 31, 2007 Note 1 - Summary Of Significant Accounting Policies (continued) D. Fund Accounting (continued) Additionally, the District reports the following proprietary funds: 5. Enterprise Fund The District s activities for which outside users are charged a fee roughly equal to the cost of providing the goods or services of those activities are accounted for in an enterprise fund. The District s non-major Enterprise Funds are: 6. Internal Service Funds a. National Breakfast and Lunch Program b. Athletic Concessions Revenues and expenses related to services provided to organizations inside the District on a cost reimbursement basis are accounted for in an internal service fund. Internal service funds have been established to account for the District s health, workers compensation, disability selfinsurance plans and property insurance. The District also reports the following fiduciary funds: 7. Agency Funds The Agency Funds are used to account for activities of student groups. These funds have no equity; assets are equal to liabilities and do not include revenues and expenditures for general operations of the District. The agency fund accounts for resources held in a custodial capacity by the District, and consists of funds that are property of students and others and cannot be used by the District in operations. E. Other Accounting Policies- Assets, Liabilities and Net Assets or Equity 1. Cash and Cash Equivalents The District's cash and cash equivalents are considered to be cash on hand, demand deposits, money market accounts, balances in private-managed public funds investment pools ("TexPool", Lone Star and MBIA ), and short-term investments with original maturities of three months or less from the date of acquisition. For the purpose of the Statement of Cash Flows, the Proprietary Fund Types consider temporary investments, with maturity of three months or less when purchased, to be cash equivalents. For cash management purposes, the District transfers balances to either a money market mutual or an externally pooled investment account. The cash is transferred back to the District as needed. 38

67 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT Exhibit E-2 NOTES TO FINANCIAL STATEMENTS (Continued) For The Year Ended August 31, 2007 Note 1 - Summary Of Significant Accounting Policies (continued) E. Other Accounting Policies- Assets, Liabilities and Net Assets or Equity (continued) 2. Investments Investments consist primarily of U.S. government agency securities and commercial paper. The District s investments are carried at fair value based on quoted market prices at year end, in accordance with Generally Accepted Accounting Principles. Investments having a maturity of three months or less are reported as cash and cash equivalents. 3. Short-Term Interfund Receivables/Payables During the course of operations, transactions occur between individual funds for specified purposes. These receivables and payables are classified as due from other funds or due to other funds on the combined balance sheet. 4. Inventories Inventories consisting of supplies and materials are stated at cost (average cost method) and they include consumable custodial, maintenance, transportation, instructional and office supplies. Inventories of governmental funds are recorded as expenditures when the supplies and materials are used or consumed (consumption method) rather than when purchased. Inventories of food commodities inventory are recorded at fair market value supplied by the Texas Department of Human Services on the date received. Commodity inventory items are recorded as expenditures when distributed to individual campuses and revenue is recognized for an equal amount. 5. Capital Assets Capital Assets, which include land, buildings, furniture and equipment, are reported in the applicable governmental or business-type activities column in the government-wide financial statements. Capital assets are defined by the District as assets with an initial individual cost of more than $5,000 and an estimated useful life in excess of one years. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Costs of the Facilities Acquisition and Construction function that relate to overall planning of District facilities, managing overall District assets and overall construction projects are treated as period costs and are not capitalized unless related to specific assets. Donated capital assets are recorded at estimated fair market value at the date of donation. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. When assets are retired or otherwise disposed of, the related costs or other recorded amounts are removed. 39

68 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT Exhibit E-2 NOTES TO FINANCIAL STATEMENTS (Continued) For The Year Ended August 31, 2007 Note 1 - Summary Of Significant Accounting Policies (continued) E. Other Accounting Policies- Assets, Liabilities and Net Assets or Equity (continued) 5. Capital Assets (Continued) Buildings, furniture and equipment of the District are depreciated using the straight line method over the following estimated useful lives: Assets Years Buildings and improvements 40 Land improvements Computer equipment 5-10 Furniture and equipment 5-20 Vehicles Long-Term Obligations In the government-wide financial statements, and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type statement of net assets. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are reported as deferred charges and amortized over the term of the related debt. Accretion of interest on the Capital Appreciation Bonds is recorded at the accreted value through the end of the fiscal year. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. 7. Transactions Between Funds Transactions which constitute reimbursements to a fund for expenditures or expenses initially made from that fund, which are properly attributable to another fund, are recorded as expenditures or expenses in the reimbursing fund and as reductions of the expenditures or expenses in the fund that is reimbursed. Other legally authorized transfers are treated as operating transfers and are included in the results of operations of the governmental funds. 40

69 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT Exhibit E-2 NOTES TO FINANCIAL STATEMENTS (Continued) For The Year Ended August 31, 2007 Note 1 - Summary Of Significant Accounting Policies (continued) E. Other Accounting Policies- Assets, Liabilities and Net Assets or Equity (continued) 8. Compensated Absences-Accumulated Vacation Pay and Sick Leave The District maintains a policy allowing employees meeting established requirements to be compensated for unused sick leave at retirement. The estimated liability for accumulated sick leave is reported in the government-wide statement of net assets for the portion that is not currently payable from available financial resources at year end and which is accounted for as a designation of fund balance in the governmental funds-general fund. The current portion of compensated absences payable is reported in the governmental funds. Annual vacation time which is unused lapses at the end of each fiscal year. There are no other compensated absences allowed under the District's personnel policies. 9. Fund Balance In the fund financial statements, the District records fund balance reserves to indicate that a portion of fund balance is legally restricted by outside parties for a specific future use or to indicate that a portion of the fund balance is not available for expenditures. The District designates portions of the unreserved fund balance to indicate the administration s tentative plans for future use of financial resources. 10. Use of Estimates The presentation of financial statements, in conformity with generally accepted accounting principles, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenditures during the reporting period. Actual results could differ from those estimates. 11. Data Control Codes The data control codes refer to the account code structure prescribed by TEA in the Financial Accountability System Resource Guide. TEA requires school districts to display these codes in the financial statements submitted to them in order to insure accuracy in building a statewide database for policy development and funding plans. 41

70 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT Exhibit E-2 NOTES TO FINANCIAL STATEMENTS (Continued) For The Year Ended August 31, 2007 Note 2 - Reconciliation Of Government-Wide And Fund Financial Statements A. Explanation of Certain Differences Between the Governmental Fund Balance Sheet and the Government-Wide Statement of Net Assets Exhibit C-2 provides the reconciliation between the fund balance for total governmental funds on the governmental fund balance sheet and the net assets for governmental activities as reported in the government-wide statement of net assets. One element of that reconciliation explains that capital assets are not financial resources and are therefore not reported in governmental funds. In addition, long-term liabilities, including bonds payable, are not due and payable in the current period and are not reported as liabilities in the funds. Also, the property taxes receivable which is included as deferred in the fund financial statements are adjusted based on when the tax levy was made and adjusted for uncollectible amounts. B. Explanation Of Certain Differences Between The Governmental Fund Statement Of Revenues, Expenditures, And Changes In Fund Balances And The Government-Wide Statement Of Activities Exhibit C-4 provides a reconciliation between the net changes in fund balance as shown on the governmental fund statement of revenues, expenditures, and changes in fund balances and the changes in net assets of governmental activities as reported on the government-wide statement of activities. One element of that reconciliation explains that current year capital outlays and debt principal payments are expenditures in the fund financial statements, but should be shown as increases in capital assets and decreases in long-term debt in the government-wide statements. This adjustment affects both the net asset balance and the change in net assets. The debt payments on retirement of debt are recorded as expenditures for fund basis financial statements but are a reduction of debt in the government wide financial statements. The capital asset additions are expenditures in the fund basis financial statements but are capitalized in the government-wide financial statements. The fund-basis financial statements do not include depreciation expense. The depreciation expense is a deduction to reconcile to the Government-Wide Statement of Activities. New debt issues are treated as sources of revenue for fundbasis financial statements, but for the government-wide statements, those amounts are recorded as a liability. Property taxes are adjusted for the accrual basis and the deferred revenues are adjusted based on prior year levies and current year uncollectible amounts. Note 3 - Stewardship, Compliance, And Accountability A. Budgetary Data The Board of Trustees adopts an "appropriated budget" for the General Fund, Debt Service Fund, the National School Breakfast and Lunch program which is included in the Enterprise Funds. Budgets are prepared using the same method of accounting as for financial reporting. The District is required to present the adopted and final amended budgeted revenues and expenditures for the general fund. The General Fund Budget report appears in the required supplementary information section where the District compares the final amended budget to actual revenues and expenditures. Per regulatory requirements, the Debt Service and Child Nutrition Funds are required to be reported with the original budget, amended budget and actual. These statements are included in the other Supplemental information of the School District s Annual Financial and Compliance Report in Exhibit H-1 and H-2. 42

71 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT Exhibit E-2 NOTES TO FINANCIAL STATEMENTS (Continued) For The Year Ended August 31, 2007 Note 3 - Stewardship, Compliance, And Accountability (continued) A. Budgetary Data (continued) The Capital Projects Fund budget is prepared on a project-basis based on the proceeds available from bond issues and planned expenditures outlined in applicable bond ordinances. Capital Projects Fund equity, which represents unexpended appropriations, is reappropriated in the subsequent fiscal year s budget until available funds for acquisition and construction of facilities have been utilized. Each major construction contract is approved based on the existing availability of bond proceeds and/or approved but unissued bonds. The following procedures are followed in establishing the budgetary data reflected in the fund financial statements: 1. Prior to August 20, the District prepares a budget for the next succeeding fiscal year beginning September 1st. The operating budget includes proposed expenditures and the means of financing them. 2. A meeting of the Board is then called for the purpose of adopting the proposed budget. At least ten days public notice of the meeting must be given. 3. Prior to September 1, the budget is legally enacted through passage of a resolution by the Board. Once a budget is approved, it can only be amended at the function and fund level by approval of a majority of the members of the Board. Amendments are presented to the Board at its regular meetings. Each amendment must have Board approval. As required by law, such amendments are made before the fact, are reflected in the official minutes of the Board, and are not made after fiscal year end. Because the District has a policy of careful budgetary control, several amendments were necessary during the year. 4. Each budget is controlled by the budget coordinator at the revenue and expenditure function/object level. Budgeted amounts are as amended by the Board. All budget appropriations lapse at year end. 5. During the fiscal year, the operating budget must be amended by the Board for changes to function appropriation amounts. All supplemental appropriations must be within limits of available revenues and fund equity. B. Encumbrances Encumbrance accounting, under which purchase orders, contracts and other commitments are recorded in order to reserve that portion of the applicable appropriation, is used in all governmental funds. Encumbrances outstanding at year end are commitments that do not constitute expenditures or liabilities, but are reported as reservations of fund balances. Since under Texas law, appropriations lapse at the end of each fiscal year, outstanding encumbrances are appropriately provided for in the subsequent fiscal year s budget to provide for the liquidation of the prior commitments. 43

72 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT Exhibit E-2 NOTES TO FINANCIAL STATEMENTS (Continued) For The Year Ended August 31, 2007 Note 4 - Deposits (Cash) And Investments A. Deposits (Cash) Deposits and investment transactions of the District are regulated by State statutes through provisions of Chapter 23, Subchapter E, Sections through 23.8 (the School Depository Act) of the Texas Education Code and other Code sections referenced therein and through provisions of the Texas Revised Civil Statutes, Title 47, Articles 2529c, and 2548a regarding security for District funds in depository institutions. In accordance with applicable statutes, the District has a depository contract with an area bank (depository) providing for interest to be earned on deposited funds and for banking charges the District incurs as a result of banking services received. Depository contracts are awarded on the basis of competitive bids received from area banks and can be awarded to more than one bank if the bids received are relatively equal. The District may place funds with the depository in interest and non-interest bearing accounts. Statutes and the depository contract require that all funds in the depository institution be fully secured by federal depository insurance or a combination of federal depository insurance and acceptable collateral securities and/or an acceptable surety bond. The collateral securities must be delivered to the District or placed with an independent trustee institution with safekeeping receipts delivered to the District. In accordance with State statutes pertaining to lawful collateralization of District deposits, safekeeping receipts are issued in the name of the depository with proper indication that the collateral securities are pledged by the depository to secure funds of the District. Acceptable collateral securities include direct obligations of the United States of America (U.S.), bonds of any agency of the U.S. (except Farmers Home Administration Insured Notes), Bonds of the State of Texas or of any county, school district, city, or town of the State of Texas that have been rated A or better by Moody's Investors Service, Inc., as authorized by Chapter 2257 Collateral for Public Funds of the Government Code. The District must approve all collateral securities prior to the security being pledged. The depository can change collateral securities pledged to secure District funds only upon obtaining the written approval of the District. All demand and time deposits in the depository bank were entirely covered by federal depository insurance and by acceptable collateral securities held in the District's name by an agent of the District at year-end in accordance with provisions of the depository contract. Demand and time deposits at various banks held on behalf of different student groups were entirely covered by federal depository insurance at year-end. At August 31, 2007, the carrying amount of the District s cash on deposit was $16,164,383 and the bank balance was $18,422,790. The District deposits in Amegy Bank and Wells Fargo Bank were secured with $18,122,790 of pledged collateral and $300,000 of FDIC coverage. In addition, cash equivalents of $155,060,209 include money market accounts of $14,201,657 and external investment pools of $124,694,

73 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT Exhibit E-2 NOTES TO FINANCIAL STATEMENTS (Continued) For The Year Ended August 31, 2007 Note 4 - Deposits (Cash) And Investments (Continued) B. Investments The Board of Trustees of the District has adopted a written investment policy (the Investment Policy ) regarding the investment of its funds as defined in the Public Funds Investment Act of 1995 (Chapter 2256, Texas Government Code). The Public Funds Investment Act requires an annual audit of investment practices. Audit procedures in this area, conducted as part of the audit, disclosed that in the area of investment practices, management reports, and establishment of appropriate policies, the District was in substantial compliance with the requirements of the Act. Additionally, the investments and investment practices of the District are in compliance with the Trustees' investment policies. The District s Investment Policy emphasizes safety of principal and liquidity, addresses investment diversification, yield, and maturity, and addresses the quality and capability of investment personnel. The Investment Policy includes a list of authorized investment instruments. The District is authorized to invest in the following investment instruments provided that they meet the guidelines of the Investment Policy: 1. Obligations of, or guaranteed by, governmental entities as permitted by Government Code ; 2. Certificates of deposit and share certificates as permitted by Government Code ; 3. Fully collateralized repurchase agreements permitted by Government Code ; 4. A securities lending program as permitted by Government Code ; 5. Banker's acceptances as permitted by Government Code ; 6. Commercial paper as permitted by Government Code ; 7. No-load money market mutual funds and no-load mutual funds as permitted by Government Code ; 8. A guaranteed investment contract as an investment vehicle for bond proceeds, provided it meets the criteria and eligibility requirements established by Government Code ; 9. Public funds investment pools as permitted by Government Code ; A summary of the District's cash and investments at August 31, 2007, are shown below. External Federal Cash on Money Market Investment Agency Commercial Deposit Accounts Pools Securities Paper Total Governmental Activities: General Fund $ 8,088,058 $ 14,201,657 $ 9,411,515 $ 24,988,688 $ 9,951,148 $ 66,641,066 Debt Service Fund 90,901 4,899,800 4,990,701 Capital Projects Fund ,680,243 99,681,162 Nonmajor Governmental Funds 1,011,086 2,524,576 3,535,662 Nonmajor Internal Service Funds 6,510,298 6,272,362 12,782,660 Total Governmental Activities 15,701,262 14,201, ,788,496 24,988,688 9,951, ,631,251 Business-type Activities: Nonmajor Enterprise Funds 463,121 1,905,673 2,368,794 Total Business-type Activities 463,121 1,905,673 2,368,794 Fiduciary Funds: Agency Funds 586, ,097 1,153,291 Total Fiduciary Funds 586, ,097 1,153,291 Total $ 16,750,577 $ 14,201,657 $ 125,261,266 $ 24,988,688 $ 9,951,148 $ 191,153,336 45

74 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT Exhibit E-2 NOTES TO FINANCIAL STATEMENTS (Continued) For The Year Ended August 31, 2007 Note 4 - Deposits (Cash) And Investments (Continued) B. Investments (continued) The District s investments are insured, registered, or the District s agent holds the securities in the District s name. Therefore, the District is not exposed to custodial credit risk. Custodial Credit risk for investments is the risk that, in event of the failure of the counterparty (e.g. broker dealer) to a transaction, a government will not be able to recover the value of its investments or collateral securities that are in the possession of another party. The District s policy requires that a third party bank trust department hold all securities owned by the District. The District generally holds all U.S. government securities to maturity. The District did not purchase any derivative investment products during the current year nor participate in any reverse repurchase agreements or security lending agreements during the fiscal year The District has a certain amount of its bank balances swept daily into an overnight money market mutual fund type investment account managed by the bank. These amounts are swept back into the bank account at the opening of business each day. The following table includes the portfolio balance, credit rating, and percentage of the portfolio balance by investment type held by the District as of year end: Credit Quality Percentage of Fair Value Rating Investments Investment Type: Local Government Investment Pools: Lone Star $ 346,503 AAA 0.2% MBIA 110,086,814 AAA 68.7% Texpool 14,827,949 AAAm 9.3% Total Local Government Investment Pools 125,261, % Investment Securities: Federal National Mortgage Assoc. 14,988,688 AAA 9.4% Federal Home Loan Bank 10,000,000 AAA 6.2% Commercial Paper 9,951,148 A-1/P-1 6.2% Total Investment Securities 34,939, % $ 160,201, % 46

75 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT Exhibit E-2 NOTES TO FINANCIAL STATEMENTS (Continued) For The Year Ended August 31, 2007 Note 4 - Deposits (Cash) And Investments (Continued) B. Investments (continued) The following table includes the portfolio balance, percentage of investment by portfolio balance, and weighted average days to maturity by investment type. Governmental Activities: Fair Weighted Market Percentage of Average Value Investments Maturity (Days) Investments: Local Government Investment Pools: Lone Star $ 346, % 34 MBIA 110,086, % 41 TexPool 12,355, % 35 Total Local Government Investment Pools 122,788, % 31 Investment Securities: Federal National Mortgage Assoc. 14,988, % 134 Federal Home Loan Bank 10,000, % 136 Commercial Paper 9,951, % 139 Total Investment Securities 34,939, % 30 Total Governmental Activities 157,728, % 61 Business-type Activities: Investments: Local Government Investment Pools: TexPool 1,905, % 35 Total Investments 1,905, % Total Business-type Activities 1,905, % Fiduciary Funds Investments: Local Government Investment Pools: Texpool 567, % 35 Total Investments 567, % Total Fiduciary Funds 567, % Total $ 160,201, % 61 47

76 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT Exhibit E-2 NOTES TO FINANCIAL STATEMENTS (Continued) For The Year Ended August 31, 2007 Note 4 - Deposits (Cash) And Investments (continued) B. Investments (continued) Local Government Investment Pools As of August 31, 2007, the District s investments included the Texas Local Pool ( TexPool ), MBIA Government Class Investment Pool ( MBIA ), the Texas Association of School Boards Lone Star Investment Pool ( Lone Star ). The TexPool, MBIA and Lone Star investment pools investments are not evidenced by securities that exist in physical or book entry form and, accordingly, do not have custodial risk. Texpool is duly chartered and overseen by the State Comptroller s Office and administered by Lehman Brothers and Federated Investors, Inc. The State Street Bank is the custodial bank. The portfolio consists of U.S. T-Bills, T-Notes, collateralized repurchase and reverse repurchase agreements, and no-load money market mutual funds regulated by the Securities and Exchange Commission. And rated AAA or equivalent by at least one nationally recognized rating service. Lone Star is duly chartered by the State of Texas Interlocal Cooperation Act, is administered by First Public, LLC, and managed by Standish Mellon and American Beacon Advisors. The Bank of New York is the custodial bank. Lone Star is restricted to invest in obligations of the United States or its agencies and instrumentalities; other obligations insured by the United States; fully collateralized repurchase agreements having a defined termination date, secured by obligations described previously; and SEC-registered no-load money market mutual funds, the assets of which consist exclusively of the obligations described above. MBIA is duly chartered by the State of Texas Interlocal Cooperation Act, is administered and managed by MBIA Municipal Investors Service Corporation. Wells Fargo Bank, N.A. is the custodial bank. The primary objectives of MBIA is to maintain safety of principal while providing participating government entities (Participants) with the highest possible rate of return for invested funds. The value of District portions in TexPool and Lone Star are the same as the value of the shares. These external pooled funds operate in a manner consistent with the SEC s Rule 2a7 of the Investment Company Act of The external pooled funds use amortized cost rather than market value to report net assets to compute share price. Accordingly, the fair value of the positions of the pooled funds is the same as the value of the external pool shares. The funds are structured similar to a money market mutual fund which allows shareholders the ability to deposit or withdraw funds on a daily basis. Interest rates are also adjusted on a daily basis. Such funds seek to maintain a constant net asset value of $1, although this cannot be fully guaranteed. Investment Risk The risk exposure for governmental and business-type activities, individual major funds, nonmajor funds in the aggregate and fiduciary fund types of the District are not significantly greater than the deposit and investment risk of the overall primary government. The District s Investment Policy segregates the portfolios into strategic categories including: 1. Operating Funds 2. Debt Service Fund 3. Capital Projects Fund 4. Other Funds 48

77 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT Exhibit E-2 NOTES TO FINANCIAL STATEMENTS (Continued) For The Year Ended August 31, 2007 Note 4 - Deposits (Cash) And Investments (continued) B. Investments (continued) The District s Investment Policy seeks to control credit risk. Such risk is controlled by investing in compliance with the District s Investment Policy, qualifying the broker and financial institutions with whom the District will purchase investments, sufficient collateralization, portfolio diversification, and limiting maturity. Interest Rate Risk Interest rate risk is the risk that changes in interest rates may adversely affect the value of the investments. The District monitors interest rate risk utilizing weighted average maturity analysis. In accordance with the Investment Policy, the District reduces its exposure to declines in fair market values by limiting the weighted average maturity of its investment portfolio to no more than 180 days, with the exception of debt service and capital projects funds which are limited to no more than 18 months without specific board approval. All investments at year end complied with the Investment Policy in regard to maximum maturity dates and weighted average maturity limitations. Adjustment to Investment s Fair Value The District s portfolio value fluctuates in an inverse relationship to any change in interest rate. Accordingly, if interest rates have risen, the portfolio value will have declined. If interest rates have fallen, the portfolio value will have risen. Market values of U.S Treasury Notes, U.S. Government Agency Securities, and Commercial Paper, are based on quoted market values. The investments are reported by the District at fair value in accordance with Governmental Accounting Standards. The District had no gain or losses from the sales of securities because they were held to maturity. The amount of increase or decrease in the fair value of investments is included in investment income as follows: Governmental Business-type Activities Activities Total Interest income $ 11,373,275 $ 152,950 $ 11,526,225 Net decrease in investment values Total Investment Earnings $ 11,373,275 $ 152,950 $ 11,526,225 Note 5 - Property Taxes Property taxes are levied by October 1st in conformity with Subtitle E, Texas Property Tax Code. Taxes are due on receipt of the tax bill and are delinquent if not paid before February 1st of the year following the year in which imposed. On January 1st of each year, a tax lien attaches to property to secure the payment of all taxes, penalties, and interest ultimately imposed. Appraised values are established by the Central Appraisal District (CAD) of Galveston County, Texas. Taxes are levied by the District's Board of Trustees based on the appraised values received from Galveston Central Appraisal District. Billing and collection of tax levies are performed by the District. Property tax rates, established in accordance with state law, are levied on real and personal property within the District's boundaries for use in financing general government and debt service expenditures. 49

78 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT Exhibit E-2 NOTES TO FINANCIAL STATEMENTS (Continued) For The Year Ended August 31, 2007 Note 5 - Property Taxes (continued) Tax rates levied to finance general government and debt service expenditures for the fiscal year were $1.330 and $0.3000, respectively, based on an assessed property valuation of approximately $12.7 billion resulting in an adjusted tax levy of approximately $206.4 million. Allowances for uncollectible taxes are based on historical experience in collecting property taxes. Uncollectible personal property taxes are periodically reviewed and written off, but the District is prohibited from writing off real property taxes without specific statutory authority from the Texas Legislature. Governmental funds net property taxes receivable at August 31, 2007, consisted of the following: General Fund Debt Service Fund Total Delinquent taxes: Current year levy $ 2,075,383 $ 468,131 $ 2,543,514 Prior year levy 5,179, ,223 6,022,063 Total delinquent taxes 7,255,223 1,310,354 8,565,577 Less allowance for uncollectible taxes (1,088,283) (196,553) (1,284,836) Net property taxes receivable $ 6,166,940 $ 1,113,801 $ 7,280,741 Note 6 - Receivables Due From Other Governments Receivables due from other governments at August 31, 2007, consisted of the following: General Fund Nonmajor Governmental Funds Nonmajor Enterprise Funds Total Due from other governments: Federal $ 4,518 $ 497,346 $ 56,094 $ 557,958 State 10,531, ,305 10,833,671 Other governments (Local governments, universities and other) 31,968 31,968 Total due from other governments $ 10,535,884 $ 831,619 $ 56,094 $ 11,423,597 50

79 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT Exhibit E-2 NOTES TO FINANCIAL STATEMENTS (Continued) For The Year Ended August 31, 2007 Note 7 - Amounts Due To/From Other Funds Amounts due to/from other funds at August 31, 2007, consisted of the following: Interfund Receivable Interfund Payable Net Governmental Activities General Fund $ $ 15,536,640 $ (15,536,640) Debt Service Fund 31,863 31,863 Capital Projects 15,000,000 15,000,000 Nonmajor Governmental Funds 441, ,241 Nonmajor Enterprise Funds 160,823 (160,823) Nonmajor Internal Service Funds 664, ,290 Total Governmental Activities 16,137,394 16,138,704 (1,310) Fiduciary Funds 1,310 1,310 Total $ 16,138,704 $ 16,138,704 $ Interfund balances represent amounts paid for current operating expenditures or amounts collected in the general fund to be distributed to other funds. The amounts are to be settled between the funds the following month. Transfer Out Transfer In Amount General Fund Capital Projects $ 17,000,000 General Fund Nonmajor Governmental Funds $ 116,355 17,116,355 Funds were transferred from the general fund to other funds as follows: Capital projects fund to finance the District s capital improvement plan. Nonmajor governmental funds to account for grant management costs. 51

80 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT Exhibit E-2 NOTES TO FINANCIAL STATEMENTS (Continued) For The Year Ended August 31, 2007 Note 8 - Capital Assets The District records assets based on historical costs and calculates depreciation on capital assets in accordance with GASB Statement 34. The District s capitalization policy is to capitalize assets costing over $5,000 and with a life expectancy of 1 year or more. Depreciation expense is allocated to functional categories based upon expenditures in the general fund. Capital asset activity for the governmental activities of the District for the year ended August 31, 2007, are as follows: Balance (Retirements) Balance August 31, 2006 Additions and Transfers August 31, 2007 Governmental Activities: Capital assets, not being depreciated: Land $ 58,183,426 $ $ $ 58,183,426 Construction in progress 79,460,451 61,623,752 (124,519,721) 16,564,482 Total Capital assets, not being depreciated 137,643,877 61,623,752 (124,519,721) 74,747,908 Capital assets, being depreciated: Land improvements 15,449,914 71,873 4,541,152 20,062,939 Buildings and improvements 440,441, , ,483, ,810,014 Furniture and equipment 67,829,534 2,059,652 10,888,325 80,777,511 Total Capital assets, being depreciated 523,721,374 3,016, ,912, ,650,464 Less accumulated depreciation for: Land improvements (4,107,935) (1,048,370) (5,156,305) Buildings and improvements (135,274,877) (14,558,705) (149,833,582) Furniture and Equipment (31,084,241) (7,285,455) 477,193 (37,892,503) Total Acumulated depreciation (170,467,053) (22,892,530) 477,193 (192,882,390) Governmental Capital Assets $ 490,898,198 $ 41,747,654 $ (129,870) $ 532,515,982 Business-type Activities: Capital assets, being depreciated: Buildings and improvements $ 17,293 $ 126,535 $ (17,293) $ 126,535 Furniture and equipment 746, ,202 (134,898) 1,094,882 Total Capital assets, being depreciated 763, ,737 (152,191) 1,221,417 Less accumulated depreciation for: Buildings and improvements (17,293) (1,493) 17,293 (1,493) Furniture and Equipment (176,753) (80,511) 108,076 (149,188) Total Acumulated depreciation (194,046) (82,004) 125,369 (150,681) Business-type Capital Assets $ 569,825 $ 527,733 $ (26,822) $ 1,070,736 52

81 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT Exhibit E-2 NOTES TO FINANCIAL STATEMENTS (Continued) For The Year Ended August 31, 2007 Note 8 - Capital Assets (continued) Depreciation expense of the governmental activities was charged to the functions/programs as follows: Depreciation Function Expense Governmental Activities: Instruction $ 14,122,061 Instructional resources and media services 428,437 Curriculum and staff development 227,917 Instructional leadership 194,745 School leadership 1,371,763 Guidance, counseling and evaluation services 738,778 Social work services 15,226 Health services 219,891 Student transportation 874,776 Extracurricular activities 480,158 General administration 738,629 Plant maintenance and operations 2,859,921 Security and monitoring services 188,671 Data processing services 417,519 Community services 14,038 Total Governmental Activities 22,892,530 Business-type Activities: Food Services 82,004 Total Business-type Activities: 82,004 Total $ 22,974,534 A summary of capital projects having construction in progress as of August 31, 2007, is scheduled as follows: Approved Project Construction Budget Construction in Progress Construction and Improvements - District High Schools $ 4,122,634 3,357,284 Estimated Remaining Commitment $ $ 765,350 Construction and Improvements - District Intermediate 3,973,316 2,330,945 1,642,371 Construction and Improvements - District Elementary Schools 2,584, ,276 2,077,359 Construction and Improvements - Central Support Facility 10,210,333 1,991,718 8,218,615 District Technology Improvments 5,178,970 5,178,970 District Parking Lot Improvements 1,589,678 1,421, ,724 Various District-wide Projects 2,538,060 1,776, ,725 $ 30,197,626 $ 16,564,482 $ 13,633,144 53

82 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT Exhibit E-2 NOTES TO FINANCIAL STATEMENTS (Continued) For The Year Ended August 31, 2007 Note 9 - Long-Term Debt And Debt Service Requirements The District issues general obligation bonds to provide funds for the renovation, acquisition and construction of major capital facilities. The general obligation bonds are direct obligations and pledge the full faith and credit of the District. General long-term debt consists of bonds payable, related accretion on premium compound interest bonds, capital leases and compensated absences. Bonds are payable solely from future revenues of the Debt Service Fund which consists principally of property taxes collected by the District, and investment income. Certain outstanding bonds may be redeemed at their par value prior to their normal maturity dates in accordance with the terms of the related bonds indentures. The District has never defaulted on any bond principal or interest payment. Debt service requirements for accrued compensated absences are payable from the General Fund when due. The capital lease which was paid off during the current fiscal year, was paid from the General Fund. A summary of general long-term debt transactions of the District for the fiscal year ended August 31, 2007, follows: Balance September 1, 2006 Additions Retirements Balance August 31, 2007 Due Within One Year General obligation bonds $ 539,685,000 $ 37,135,000 $ (13,735,000) $ 563,085,000 $ 14,920,000 Less deferred amounts: For issuance premiums/discounts 21,802, ,640 (1,228,868) 21,159,418 Gain or (loss) on refunding bonds (20,543,758) 2,541,531 (18,002,227) Total Bonds and Notes Payable 540,943,888 37,720,640 (12,422,337) 566,242,191 14,920,000 Accreted interest on premium compound interest bonds 11,953,896 1,000,231 12,954,127 Compensated absences payable 3,016, ,495 3,292, ,069 Total Other Liabilities $ 555,914,615 $ 38,720,871 $ (12,146,842) $ 582,488,644 $ 15,554,069 Bonds Payable Bonded debt, at August 31, 2007, is comprised of the following individual issues: Issue Original issuance amount Interest Rate (%) Maturity Date Debt Outstanding Unlimited Tax Refunding Bonds - Series 1991-A (CAB) $13,379, % to 7.00% 2011 $ 3,650,000 Unlimited Tax Schoolhouse Bonds - Series ,855, % to 7.00% ,000 Unlimited Tax Refunding Bonds - Series ,239, % to 5.125% ,010,000 Unlimited Tax Schoolhouse and Refunding Bonds - Series 2000 (CAB) 139,122, % to 6.00% ,265,000 Unlimited Tax Schoolhouse and Refunding Bonds - Series ,118, % to 5.00% ,840,000 Unlimited Tax Schoolhouse and Refunding Bonds - Series 2004-A (CAB) 203,370, % to 5.00% ,305,000 Unlimited Tax Schoolhouse Adjustable Rate Bonds - Series 2004-B 51,000,000 Adjustable ,000,000 Unlimited Tax Schoolhouse Bonds - Series ,000, % to 5.00% ,500,000 Unlimited Tax Schoolhouse Bonds - Series ,885, % to 5.50% ,885,000 Unlimited Tax Schoolhouse Bonds - Series ,135, % to 5.00% ,135,000 Total Bonds Payable 563,085,000 Less Unamortized Refunding Loss (18,002,227) Plus Unamortized Premiums on Issuance 21,159,418 Net Bonds Payable 566,242,191 Less Current Portion (14,920,000) Long-term Portion of Bonds Payable $ 551,322,191 54

83 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT Exhibit E-2 NOTES TO FINANCIAL STATEMENTS (Continued) For The Year Ended August 31, 2007 Note 9 - Long-Term Debt And Debt Service Requirements (continued) The District is in compliance with all significant bond compliance requirements. As of August 31, 2007, the District had $145,850,000 in authorized, unissued bonds. Annual Debt Service Requirements Annual requirements to amortize all bonded debt outstanding as of August 31, 2007, follow: Year Ending August 31, Principal Interest Totals 2008 $ 14,920,000 $ 25,898,992 $ 40,818, ,070,000 28,704,716 40,774, ,795,000 31,273,479 42,068, ,740,000 29,632,597 42,372, ,185,000 24,477,317 42,662, ,110,000 23,587,458 42,697, ,755,000 21,982,693 42,737, ,980,000 20,917,024 42,897, ,100,000 19,799,718 42,899, ,270,000 18,627,113 42,897, ,515,000 17,383,672 42,898, ,820,000 16,079,794 42,899, ,180,000 14,717,588 42,897, ,615,000 13,280,358 42,895, ,065,000 11,831,699 42,896, ,915,000 10,471,788 37,386, ,245,000 9,139,900 37,384, ,645,000 7,741,750 37,386, ,080,000 6,304,143 37,384, ,510,000 4,878,619 37,388, ,950,000 3,437,299 37,387, ,380,000 2,005,981 37,385, ,075,000 1,160,125 7,235, ,390, ,500 7,238, ,715, ,875 7,235, ,060, ,500 7,236, ,085,000 $ 364,879,698 $ 927,964,698 (14,920,000) Less Current Portion $ 548,165,000 Long-term Portion of Bonds Payable Interest requirements for variable rate debt are calculated using the interest rate effective at the end of the reporting year. The interest rate is reset periodically in accordance with rate reset provisions establishing a one to five year period with interest rates set according to the time period chosen by the Board of Trustees. The bonds carry a current rate of approximately 3.75%. 55

84 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT Exhibit E-2 NOTES TO FINANCIAL STATEMENTS (Continued) For The Year Ended August 31, 2007 Note 9 - Long-Term Debt And Debt Service Requirements (continued) Accreted Interest on Premium Compound Interest Bonds A portion of the bonds sold in the Series 1991-A, 2000 and 2004-A refunding bond issues were capital appreciation bonds commonly referred to as "premium compound interest bonds." The 1991-A obligations have a principal value of $3,979,556 and a maturity value of $13,950,000. The 2000 obligations have a principal value of $1,482,906 and a maturity value of $2,480,000. The 2004-A obligations have a principal value of $3,250,097 and a maturity value of $4,030,000. The District records the appreciation of bond principal annually for the accreted value of the bonds through maturity of the issue. The accreted interest on these obligations will be paid upon maturity in the fiscal year ending August 31, 2009 through The accreted interest of $12,954,127 has been included in the long-term debt of the District. The bonds, maturity value, original bond amount, accreted interest and accreted value as of August 31, 2007, are as follows: Capital Maturity Original Bond Accreted Acreeted Value Appreciation Value of Principal Interest of Bonds at Bonds Maturity Bonds Amount on Bonds Year End 1991-A $ 13,950,000 $ 3,650,000 $ 7,995,237 $ 11,645, ,480, ,000 1,629,623 2,184, A ,030, ,000 3,329,267 3,614,267 $ 20,460,000 $ 4,490,000 $ 12,954,127 $ 17,444,127 Commitments Under Operating Leases Commitments under operating (noncapitalized) lease agreements for facilities and equipment are classified as State of Texas Rental Contracts and are cancelable contingent upon budget funding approval. The District is therefore not obligated for any future minimum rental payments at August 31, The imputed interest on the leases is not readily determinable. Rental expenditures during the year ended August 31, 2007 amounted to $1,337,600. Note 10 - Prior Year Refunding Of General Long-Term Debt In 1993, 1998, 2000, 2002 and 2004 the District defeased certain outstanding bonds by placing proceeds of new bonds in irrevocable escrow accounts to provide for all future debt service payments on the old bonds. Accordingly, the escrow accounts to provide for all future bonds are not included in the District s financial statements. At August 31, 2007, $224,625,000 of previously refunded bonds outstanding are considered defeased. 56

85 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT Exhibit E-2 NOTES TO FINANCIAL STATEMENTS (Continued) For The Year Ended August 31, 2007 Note 11 - Deferred Revenue Deferred revenue at year end represents assets that are not available for use by the District to liquidate current year liabilities. A summary of deferred revenue by fund follows: Nonmajor Governmental General Fund Debt Service Fund and Proprietary Funds Total Net property taxes receivable $ 5,552,521 $ 978,120 $ $ 6,530,641 State Aid Proceeds - Expenditure driven grants: State 815, ,848 1,735,712 Local 397, ,928 Net Total Receivables $ 5,552,521 $ 1,793,984 $ 1,317,776 $ 8,664,281 Deferred property taxes: General Fund Debt Sevice Fund Unavailable Unearned Total $ 5,552,521 $ $ 5,552, , ,120 Grant funds received prior to meeting eligibility requirements 2,133,640 2,133,640 Total $ 6,530,641 $ 2,133,640 $ 8,664,281 Note 12 - Fund Equity Designations of Fund Balance In the fund financial statements, the District records fund balance reserves to indicate that a portion of fund balance is legally restricted by outside parties for a specific future use or to indicate that a portion of the fund balance is not available for expenditures. The District designates portions of the unreserved fund balance to indicate the administration s tentative plans for future use of financial resources. The designation is determined by management at the end of each fiscal year. A summary of designated fund balance as of August 31, 2007, for all governmental fund types follows: General Fund Designated fund balance: Sick leave benefits $ 2,658,257 Special education 750,000 Disaster recovery 2,500,000 Total designated fund balance $ 5,908,257 57

86 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT Exhibit E-2 NOTES TO FINANCIAL STATEMENTS (Continued) For The Year Ended August 31, 2007 Note 13 - Revenues From Local, Intermediate And Out-Of-State Sources A summary of local revenues recorded in the governmental funds for the fiscal year ended August 31, 2007, follows: General Fund Debt Service Fund Capital Projects Other Governmental Funds Total Property Taxes $ 168,025,332 $ 37,847,939 $ $ $ 205,873,271 Penalties, interest and other tax related revenue 1,443, ,353 1,733,490 Investment Income 5,640, ,043 4,783, ,696 11,231,859 Co-curricular student activities 388,719 2,675,071 3,063,790 Donations 56,232 48, , ,749 Facility rentals 389, ,781 SSA - Member Districts 36,938 1,047,633 1,084,571 Tuition and fees 435, ,030 Other 292, , ,897 $ 176,707,325 $ 38,793,335 $ 4,831,501 $ 4,686,277 $ 225,018,438 Note 14 - General Fund Federal Program Revenues A summary of federal program revenues received in the General Fund for the fiscal year ended August 31, 2007, follows: Amount Recorded in Program or Grant CFDA # General Fund Indirect costs: ESEA, Title IV - Safe and Drug Free Schools A $ 1,452 ESEA, Title I, Part A - Improving Basic Education A 27,302 IDEA B - Preschool A 1,983 IDEA B - High Cost Risk Pool A 3,076 ESEA, Title II, Part A - Training and Recruiting A 19,211 Public Charter School Grant A 14,981 ESEA, Title III, Part A - English Language Acquisition A 8,338 ESEA, Title V, Part A - Innovative Programs A 1,585 Clean Living Encouragement and Responsibility D 3,187 Drug Free Community Support ,543 Smaller Learning Communities L 14,327 Total indirect costs 98,985 Direct costs: Medicaid (MAC) ,191 Medicaid (SHARS) ,309 ROTC ,039 Impact Aid ,362 FEMA Hurricane Reimbursement-Hurricane Rita Total direct costs 560,609 $ 659,594 58

87 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT Exhibit E-2 NOTES TO FINANCIAL STATEMENTS (Continued) For The Year Ended August 31, 2007 Note 15 - Retirement Plan Plan Description The Teacher Retirement System of Texas (TRS), a Public Employee Retirement System (PERS), is a multiple-employer defined benefit contribution plan. TRS is a cost-sharing PERS with one exception, all risks and costs are not shared by the employer, but are the liability of the State of Texas. By statute, the State of Texas contributes to the retirement system an amount equal to the current authorized rate times the aggregate annual compensation of all members of the retirement system during that fiscal year. The payroll for District employees covered by the system for the fiscal year ending August 31, 2007, was approximately $167.2 million; the District's total payroll was approximately $174.1 million. For members of the retirement system entitled to the minimum salary for certain school personnel under Section , Texas Education Code, the District pays the state's contribution on the portion of the member's salary that exceeds the statutory minimum. Types of Employees Covered All employees of public, state-supported educational institutions in Texas who are employed for one-half or more of the standard workload and who are not exempted from membership under Texas Government Code, Title 8, Subtitle C, Section , are covered by the plan. Benefit Provisions The Teacher Retirement System of Texas administers retirement and disability annuities and death and survivor benefits to employees and beneficiaries of employees of the public school system of Texas. It operates primarily under the provisions of Texas Constitution Article XVI, Section 67 and Texas Government Code, Title 8, Subtitle C. The system also administers proportional retirement benefits under Texas Government Code, Title 8, Chapter 803 and 805, respectively. Service Retirement 1. Normal: Age 65 with 5 years of service Age 60 with 20 years of service Age 50 with 30 years of service Any combination of age plus years of service which equals Reduced: Age 55 with at least 5 years of service Any age below 50 with 30 years of service A member is fully vested after 5 years of creditable service and entitled to any benefit for which eligibility requirements have been met. 59

88 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT Exhibit E-2 NOTES TO FINANCIAL STATEMENTS (Continued) For The Year Ended August 31, 2007 Note 15 - Retirement Plan (Continued) Plan Description (continued) Funding Policy Under state law, employees are required to pay 6.65% of their eligible gross earnings to TRS. Of the 6.65%, 0.25% is a contribution toward retiree health insurance (TRS-Care). The State of Texas contributes 6% of all employees' eligible gross earnings, except for those District employees subject to statutory minimum requirements and those employees being paid from and participating in federallyfunded programs. Both of those rates are established by state statutes. The statutory minimum requirements are based on the State of Texas teacher schedule and then adjusted based on local tax rates. For employees funded by federal programs, the federal programs are required to contribute 7%. The State contributes 1% toward the retiree health insurance and the District pays 0.5% toward the retiree health care insurance. Contribution requirements are not actuarially determined but are legally established each biennium pursuant to the following state funding policy: (1) The State constitution requires the legislature to establish a member contribution rate of not less than 6% of the member s annual compensation and a state contribution rate of not less than 6% and not more than 10% of the aggregate annual compensation of all members of the system during that fiscal year. (2) A State statute prohibits benefit improvements or contribution reductions, if, as a result of the particular action, the time required to amortize TRS s unfunded actuarial liabilities would be increased to a period that exceeds 31 years, or if the amortization period exceeds 31 years, the period would be increased by such action. Employer contributions from federal and private grants are paid from the grant itself and are not direct obligations of the school district. Other employer contributions made above the statutory minimum payments are a direct obligation of the school district. For the year ending August 31, 2007, the District was required to pay a portion of the State's 6% contribution. The total contribution requirement for the fiscal year ending August 31, 2007, was approximately $21.9 million, which consisted of approximately $8.5 million from the State, approximately $2.7 million from the District, and approximately $10.7 million from the employees. The $8.5 million contributed by the State has been recorded in the financial statements of the District as both revenues and payroll expenditures. These contributions are the legal responsibility of the State. Contributions made by the State, District, and employees, and the District s annual covered payroll for the fiscal years 2005, 2006, and 2007, are as follows: Fiscal Year State TRS Contributions Made on Behalf of the District District Required Contributions to TRS Employee Contributions to TRS District's Annual Covered Payroll 2005 $ 7,089,719 $ 2,011,072 $ 9,562,022 $ 138,579, ,425,857 2,771,506 9,693, ,456, ,522,415 2,680,557 10,717, ,183,860 60

89 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT Exhibit E-2 NOTES TO FINANCIAL STATEMENTS (Continued) For The Year Ended August 31, 2007 Note 15 - Retirement Plan (Continued) Plan Description (continued) The contributions made by the State on behalf of the District have been recorded in the financial statements of the District as both state revenues and payroll expenditures. These contributions are the legal responsibility of the State. TRS issues a publicly available financial report that includes financial statements and required supplementary information for the defined benefit pension plan. The report may be obtained by writing to the TRS Communications Department, 100 Red River Street, Austin, Texas 78701, by calling the TRS Communications Department at ; or by downloading the report from the TRS Internet website ( under the TRS Publications heading. On-Behalf Payments The amounts recognized for state revenues and expenditures for on-behalf payments relating to fringe benefits for the year ended August 31, 2007 was as follows: Contributions to pension plan $ 8,522,416 Insurance contributions (TRS Care) 1,420,900 $ 9,943,316 TRS-Care Health Insurance Benefits for Retirees TRS-Care is currently funded on a pay-as-you-go basis and is subject to change based on available funding. At the inception of the plan in fiscal year 1986, funding was projected to last 10 years through fiscal year The original funding was sufficient to maintain the solvency of the fund through fiscal year Since that time, the appropriations and contributions have been established to be sufficient to provide benefits for the biennium. The Texas Legislature determines the funding of benefits and has no continuing obligation to provide benefits beyond each fiscal year. TRS-Care is the group retiree health benefits program administered by TRS. More than 190,000 retirees and their dependents participate in this plan. Aetna administers the medical benefits; Caremark administers the pharmacy benefits. TRS-Care consist of three tiers of coverage: TRS-Care 1, TRS-Care 2, and TRS-Care 3. Each tier has deductibles or premiums that are differentiated by the retiree s or surviving spouse s Medicare status: enrolled in Medicare Part A and eligible for Medicare Part B; not enrolled in Medicare Part A, but eligible to purchase Medicare Part B; and not eligible for Medicare. Dependents must be enrolled in the same coverage tier as the retiree or surviving spouse. For all disability and service retirees, regardless of their retirement date, to be eligible for TRS-Care, a disability retiree or a service retiree must meet the applicable eligibility requirements specified below. Disability Retirees - An individual is eligible to participate in the program when they become a disability retiree. Once enrolled in TRS-Care as a disability retiree, they may continue to participate as long as they are a disability retiree. 61

90 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT Exhibit E-2 NOTES TO FINANCIAL STATEMENTS (Continued) For The Year Ended August 31, 2007 Note 15 - Retirement Plan (Continued) TRS-Care Health Insurance Benefits for Retirees (continued) Coverage for a disability retiree with fewer than 10 years of service will end when disability retirement benefits end. Service Retirees - To be eligible to TRS-Care, an individual must have at least 10 years of service credit in the system. This service credit may include up to five years of military service credit, but it may not include any other special or equivalent credit purchased. Additionally, the service retiree must meet one of the following requirements: The sum of the retiree s age and years of service credit in the system equals or exceeds 80 at the time of retirement, regardless of whether the retiree had a reduction in the retirement annuity for early age (years of service credit can include all purchased service); or The retiree has 30 or more years of service credit in the retirement system at the time of retirement (years of service credit can include all purchased service). Note 16 - Risk Management The District is exposed to various risks related to torts: theft of, damage to, and destruction of assets; errors and omissions; and natural disasters. The District's risk management program encompasses various means of protecting the District against loss by obtaining property, casualty, and liability coverage through commercial insurance carriers. Settled claims have not exceeded insurance coverage in any of the previous three fiscal years. There has not been any significant reduction in insurance coverage from the previous year. In addition, the District is a member of the Texas Association of School Board s Joint Account Selfinsurance Fund ( TASB Fund ). The TASB Fund was created to formulate, develop and administer a program of modified self-funding for the property and/or liability coverage for its membership, provide claims administration, and develop a comprehensive loss control program. The District pays contributions to the TASB Fund for its general and educators liability coverage. The District s agreement with the TASB Fund provides that the TASB Fund will be self-sustaining through member premiums and will provide, through commercial companies, reinsurance contracts. Health Care Coverage The District sponsors a modified risk management program for health insurance. The District contributes a minimum of $ per month per employee that participates in the plan; employees, at their option, authorize payroll withholdings to pay contributions or premiums for dependents. Premiums are paid into the Health Insurance internal service fund by all other funds and are available to pay claims, claim reserves, and administrative costs of the program. These interfund premiums re reported as revenue in the internal service fund. 62

91 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT Exhibit E-2 NOTES TO FINANCIAL STATEMENTS (Continued) For The Year Ended August 31, 2007 Note 16 - Risk Management (continued) Health Care Coverage (continued) Liabilities of the fund are reported when it is probable that a loss has occurred and the amount of the loss can be reasonably estimated. Liabilities also include an estimated amount for claims that have been incurred but not reported ( IBNR ). The result of the process to estimate the claims liability is based upon the District s historical experience. An excess coverage insurance policy covers individual claims in excess of $200,000. The District also has an aggregate excess insurance policy with an excess limit of $5,000,000. There were no significant reductions in insurance coverage from the prior year and settlements have not exceeded coverages for each of the past three fiscal years. Changes in the balances of claims liabilities during the past two fiscal years are as follows: Fiscal Beginning of Current Year Claims End of Year Year Year Accrual Estimates Payments Accrual 2006 $ 1,750,000 $ 15,402,202 $ (14,906,548) $ 2,245, ,245,654 17,658,790 (17,254,444) 2,650,000 Workers Compensation During the year ended August 31, 2007, employees of the District were provided with workers compensation benefits which were self-funded from accumulated assets, provided directly from the District, which is the plan sponsor. All claims were submitted, processed, and approved by a third party administrator acting as an agent of the District. The plan is documented by contractual agreement. Liabilities of the fund are reported when it is probable that a loss has occurred and the amount of the loss can be reasonably estimated. Liabilities also include an estimated amount for claims that have been incurred but not reported ( IBNR ). The result of the process to estimate the claims liability is not an exact amount as it depends on many complex factors, such as inflation, changes in legal doctrines, and damage awards. Accordingly, claims are reevaluated periodically to consider the effects of these factors. The estimate of claims liability also includes amounts for incremental claim adjustment expenses related to specific claims and other claim adjustment expenses regardless of whether allocated to specific claims. Estimated recoveries, for example from stop-loss or subrogation, are another component of the claims liability estimate. An excess coverage insurance policy covers individual claims in excess of $300,000 up to the statutory limits for any given claim. There were no significant reductions in insurance coverage from the prior year and settlements have not exceeded coverages for each of the past three fiscal years. Changes in the balances of claims liabilities during the past two fiscal years are as follows: Fiscal Beginning of Current Year Claims End of Year Year Year Accrual Estimates Payments Accrual 2006 $ 815,468 $ 746,411 $ (746,411) $ 815, , ,878 (749,878) 815,468 63

92 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT Exhibit E-2 NOTES TO FINANCIAL STATEMENTS (Continued) For The Year Ended August 31, 2007 Note 17 - Compensated Absences Sick Leave Policy Upon retirement or death of certain employees, the District pays any accrued sick and vacation leave in a lump sum cash payment to such employee or the employee s estate. Individuals employed after October 1, 1985 are not eligible to receive the lump sum payments. The District records these lump sum payments expenditures in the General Fund. The District also records a liability in the General Fund based on estimated payments to be made within one year. This liability amounted to $634,069 as of August 31, The District estimates the long-term portion of the sick leave liability and records this amount in the government-wide financials as a long-term liability. The long-term liability for compensated absences was $2,658,257 as of August 31, The management of the District has designated a portion of the fund balance in the General Fund to pay the accrued sick leave liability. Changes in the sick leave liability for the year ended August 31, 2007 was as follows: Balance September 1, 2006 Additions Compensated absences payable $ 3,016, ,652 Vacation Leave $ (501,157) Deductions - Payments to Participants Balance August 31, 2007 $ $ 3,292,326 The District s employees earn vacation time that can be accumulated for a one year period. No liability has been recorded for accumulated vacation pay since the amount is not material to the financial statements. Note 18 - Litigation, Commitments And Contingencies From time to time, the District is a defendant in legal proceedings relating to its operations as a school district. In the best judgment of the District's management, the outcome of any present legal proceedings will not have any adverse material effect on the accompanying financial statements. The District received significant financial assistance from federal and state governmental agencies in the form of grants. The disbursements of funds received under these programs generally requires compliance with terms and conditions specified in the grant agreements and are subject to audit by the grantor agencies and the TEA. Any disallowed claims resulting from such audits could become a liability of the General Fund. However, in the opinion of management, such disallowed claims, if any, will not have a material effect on any of the financial statements of the individual fund types included herein or on the overall financial position of the District at year end. 64

93 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT Exhibit E-2 NOTES TO FINANCIAL STATEMENTS (Continued) For The Year Ended August 31, 2007 Note 19 - Shared Service Arrangements The District participates in a Shared Service Arrangement (SSA) for the Juvenile Justice Alternative Education Program services with eight other school districts. Approximately 26.3% of the students served by the SSA are attributable to the District. The District does not account for the revenues or expenditures for this program and does not disclose them in these financial statements. The District neither has a joint ownership interest in fixed assets purchased by the fiscal agent, Dickinson Independent School District, nor does the District have a net equity interest in the fiscal agent. The fiscal agent is neither accumulating significant financial resources nor fiscal contingencies that would give rise to a future additional benefit or burden to Clear Creek Independent School District. The fiscal agent manager is responsible for all financial activities of the SSA. Presented below are the revenues and expenditures attributable to the Districts participation. SSA - IDEA B - Discretionary (Deaf) SSA - IDEA B - Formula (Deaf) SSA - IDEA B - Preschool (Deaf) Alvin Independent School District $ 12,935 $ 8,502 1,792 SSA - IDEA C - Early Intervention (Deaf) $ $ 380 Clear Creek Independent School District 21,558 14,171 2, Dickinson Independent School District 7,391 4,859 1, Friendswood Independent School District 2,464 1, Galveston Independent School District 3,696 2, Hitchcock Independent School District 1, La Marque Independent School District 3,080 2, Pearland Independent School District 9,239 6,073 1, Santa Fe Independent School District 4,312 2, Texas City Independent School District 4,312 2, $ 70,219 $ 46,156 $ 9,735 $ 2,055 The District participates in a Shared Service Arrangement (SSA) for the Galveston-Brazoria Co-op for the Hearing Impaired with ten other school districts. Approximately 33.0% of the students served by the SSA are attributable to the District. The District is also the fiscal agent of the SSA which provides a system of direct and support services to eligible hearing impaired students of member districts. In addition to the District, other member districts include Alvin ISD, Dickinson ISD, Friendswood ISD, Galveston ISD, Hitchcock ISD, La Marque ISD, Pearland ISD, Santa Fe ISD and Texas City ISD. All services are provided by the fiscal agent. The member districts provide the funds to the fiscal agent. According to guidance provided in the Texas Education Agency s Financial Accountability and Resource Guide, the District has accounted for the fiscal agent s activities of the SSA in Special Revenue Fund No. 458, SSA - Regional Day School Deaf (Local), and will be accounted for using Model 3 in the SSA section of the resource guide. Presented below are the revenues and expenditures attributable to the Districts participation. Revenues 5700 Local revenue from member districts $ 94,190 $ 94,190 Expenditures 6100 Payroll costs $ 89, Contracted services 1, Supplies and materials 3, Miscellaneous operating costs $ ,190 65

94 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT Exhibit E-2 NOTES TO FINANCIAL STATEMENTS (Continued) For The Year Ended August 31, 2007 Note 19 - Shared Service Arrangements (continued) The District is the fiscal agent for a Shared Services Arrangement ( SSA ) which provides a system of direct and support services to eligible hearing impaired students of member districts. In addition to the District, other member districts include Alvin ISD, Dickinson ISD, Friendswood ISD, Galveston ISD, Hitchcock ISD, La Marque ISD, Pearland ISD, Santa Fe ISD and Texas City ISD. All services are provided by the fiscal agent. The member districts provide the funds to the fiscal agent. According to guidance provided in the Texas Education Agency s Financial Accountability and Resource Guide, the District has accounted for the fiscal agent s activities of the SSA in the special revenue funds listed below, and will be accounted for using Model 3 in the SSA section of the resource guide. Expenditures of the SSA are summarized below: Revenues 5700 Local revenue from member districts $ 408,325 $ 408,325 Expenditures 6100 Payroll costs $ 320, Contracted services 58, Supplies and materials 23, Miscellaneous operating costs $ 5, ,325 The District participates in a shared services arrangement for its Juvenile Justice Alternative Education Program. Although a portion of the activity of the shared services arrangement is attributable to the District s participation, the District does not account for revenues or expenditures in this program and does not disclose them in these financial statements. The District neither has a joint ownership interest in fixed assets purchased by the fiscal agent, Harris County, nor does the District have a net equity interest in the fiscal agent. The fiscal agent is neither accumulating significant financial resources nor fiscal exigencies that would give rise to a future additional benefit or burden to Clear Creek Independent School District. The fiscal agent manager is responsible for all financial activities of the shared services arrangement. Presented below are the revenues and expenditures attributable to the District s participation. Revenues 5700 Local revenue from member districts $ 102,381 $ 102,381 Expenditures 6100 Payroll costs $ 102,381 $ 102,381 66

95 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT Exhibit E-2 NOTES TO FINANCIAL STATEMENTS (Continued) For The Year Ended August 31, 2007 Note 20 - Arbitrage In accordance with the provisions of Section 148(f) of the Internal Revenue Code of 1986, as amended, bonds must satisfy certain arbitrage rebate requirements. Positive arbitrage is the excess of (1) the amount earned on investments purchased with bond proceeds, or (2) the amount that such investments would have earned had such investments been invested at a rate equal to the yield on the bond issue. In order to comply with the arbitrage rebate requirements, positive arbitrage must be paid to the U.S. Treasury at the end of each five-year anniversary date of the bond issue. The District has estimated that its arbitrage liability as of August 31, 2007, was not material to these financial statements. Note 21 - Other Post-Employment Benefits The District does not provide post-employment healthcare benefits except those mandated by Consolidated Omnibus Budget Reconciliation Act ( COBRA ). The requirements established by COBRA are fully funded by employees who elect coverage under the act, and no direct costs are incurred by the District. Note 22 - Related Organizations The Clear Creek Education Foundation ( Foundation ), a non-profit entity which was organized in 1992 to provide funds for the advancement of teaching objectives, is a related organization of the District as defined by Governmental Accounting Standards Board Statement No. 14. The members of the Board of the Foundation serve without financial compensation. Note 23 - Prior Period Adjustment The District, during the year ended August 31, 2007, determined that revenues in the campus activity fund were no longer subject to deferral. The restatement of net assets is as follows: Beginning net assets - As originally presented $ 117,751,602 Restatement due to: Recognition of revenues on the modified accrual basis of accounting 2,053,396 Beginning net assets - As restated $ 119,804,998 67

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97 Required Supplemental Information 69

98 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT Exhibit F-1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - ORIGINAL BUDGET, AMENDED FINAL (GAAP BASIS) AND ACTUAL - GENERAL FUND For the Year Ended August 31, 2007 Budgeted Amounts Data Control Codes Original Final Revenues 5700 Local revenues $ 171,401, ,326,632 Actual Amounts, Budgetary Basis Variance with Final Budget - Positive (Negative) $ $ 176,707,325 $ 3,380, State program revenues 62,273,198 62,273,198 62,306,964 33, Federal program revenues 555, , , ,594 Total revenues 234,229, ,154, ,673,883 3,519,053 Expenditures Current: 0011 Instruction 143,186, ,447, ,763,336 7,684, Instruction resources and media services 4,045,788 4,338,615 4,088, , Curriculum and instructional staff 2,666,607 2,686,316 2,174, , Instructional leadership 1,800,414 2,066,702 1,858, , School leadership 13,809,482 13,797,184 13,090, , Guidance, counseling and evaluation services 7,161,396 7,584,753 7,049, , Social work services 360, , , , Health services 2,259,621 2,259,003 2,098, , Student transportation 8,984,845 9,016,270 8,347, , Food services 284, , ,005 47, Extracurricular activities 4,702,989 4,762,228 4,582, , General administration 7,366,491 7,382,332 7,048, , Plant maintenance and operations 27,366,241 28,741,244 27,291,523 1,449, Security and monitoring services 2,041,642 2,279,722 1,800, , Data processing services 4,442,663 4,442,664 3,984, , Community services 165, , ,960 33,587 Intergovernmental: 0093 Payments related to shared services arrangements 468, , ,515 2, Payments to Juvenile Justice Alt. Ed. Prgm. 121, , ,381 8, Payments to tax increment fund 900,000 1,010,000 1,002,481 7,519 Total Expenditures 232,134, ,285, ,344,156 13,941, Excess (deficiency) of revenues over expenditures 2,094,793 1,868,946 19,329,727 17,460,781 Other Financing Sources (Uses): 7912 Proceeds from the sale of assets 5,409 5, Operating transfers out (2,000,000) (17,000,000) (17,116,355) (116,355) Total other financing sources (uses) (2,000,000) (17,000,000) (17,110,946) (110,946) Net change in fund balances 94,793 (15,131,054) 2,218,781 17,349,835 Fund balances - beginning 51,273,165 51,273,165 51,273,165 Fund balances - ending $ 51,367,958 $ 36,142,111 $ 53,491,946 $ 17,349,835 70

99 Clear Creek Independent School District Exhibit F-2 NOTES TO REQUIRED SUPPLEMENTARY INFORMATION For The Year Ended August 31, 2007 Budgets and Budgetary Accounting Each school district in Texas is required by law to prepare annually a budget of anticipated revenues and expenditures for the General Fund, Debt Service Fund, and the National School Breakfast and Lunch Fund before the beginning of the fiscal year. For fiscal year beginning September 1 st, the Texas Education Code requires the budget to be prepared not later than August 20 th and adopted by August 31 st of each year. The District s administration determines budgetary funding priorities using a site-based budgeting concept, which is consistent with GAAP. Final budget allocations are determined by the Board, which subsequently establishes a tax rate sufficient to support the approved budget. The annual budget, which is prepared on the modified accrual basis of accounting, must be adopted by the Board at a scheduled meeting after giving ten days public notice of the meeting. The District annually adopts legally authorized appropriated budgets for the General, Debt Service and National School Breakfast and Lunch enterprise fund. The District s administration performs budget reviews during the year in which budget requirements are re-evaluated and revisions are recommended to the Board. The Board may approve amendments to the budget, which are required when a change is made to any one of the functional expenditure categories or revenue object accounts defined by the TEA. Expenditures may not legally exceed budgeted appropriations, as amended, at the function level by fund. Unexpended appropriations lapse at year-end. During the year ended August 31, 2007, the Board of Trustees approved budget amendments increasing expenditures and operating transfers as follows: General Fund Debt Service National School Breakfast and Lunch Expenditure amendments approved $ 2,151,479 $ $ 70,000 Operating transfer amendments approved 15,000,000 Total $ 17,151,479 $ $ 70,000 Encumbrance accounting is utilized in all governmental fund types. Encumbrances for goods or purchased services are documented by purchase orders or contracts. Under Texas law, appropriations lapse at year-end and encumbrances outstanding at that time are appropriately provided for in the subsequent year s budget. As of August 31, encumbrances outstanding were as follows: General Fund Capital Projects Debt Service Nonmajor Governmental Funds Encumbrances Outstanding $ 94,673 $ 22,811,536 $ $ 71

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101 Other Supplementary Information 73

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103 Nonmajor Governmental Funds Special Revenue Funds The Special Revenue Funds are used to account for all federal, state and locally-funded grants. These grants are awarded to the District with the purpose of accomplishing specific educational goals. Grants included in the Special Revenue Funds are described below. Fund Number Fund Name & Description 204 ESEA, Title IV - SDSFC - supplements age-appropriate safety/violence and drug education, staff development, and safety/violence and drug abuse prevention programs for grades prekindergarten through ESEA, Title I, Part A - Basic - supplemental service designed to accelerate the academic achievement of economically disadvantaged students, especially in the tested areas, to ensure that state standards are met on identified campuses. 224 IDEA, Part B - Formula - salaries and supplies to aid children with disabilities with low reading achievement. 225 IDEA, Part B - Preschool - aids preschool students with disabilities. 226 IDEA - Part B, High Cost Risk Pool - assists with high need students with disabilities whose direct special education and related services costs exceed $25,000 per school year. 243 Vocational Education - Technical Preparation - provides combined secondary and post-secondary programs in the areas of engineering, science, agriculture, health and business. 244 Vocational Education - Basic - funds are for the use of various vocationally-inclined students in regular, disadvantaged and disability classes. 255 ESEA, Title II, Part A - TPTR (Teacher and Principal Training and Recruiting) supplements the professional development, retention and recruitment programs district-wide, specifically on high needs campuses. 258 Public Charter School Dissemination - funds granted to public charter schools for planning, program design, implementation, assisting other schools and/or to disseminate information about the charter school. 262 ESEA, Title II, Part D - Enhancing Education Through Technology - supplements and supports a comprehensive system that effectively uses technology in elementary and secondary schools to improve student academic achievement. 263 ESEA, Title III, Part A - English Language Acquisition - provides additional educational opportunities to supplement programs for students of limited English proficiency and immigrant children by assisting the children to learn English and meet challengin 265 Title IV, Part B 21st Century Community Learning Centers - provides opportunities for communities to establish or expand activities in community learning centers that provide opportunities for academic enrichment and additional services to students and literary and related educational development for families of students. 269 ESEA, Title V, Part A - Innovative Programs - supplements student academic achievement through innovational strategies and programs. 281 C.L.E.A.R. Grant - enables students with their parents' consent, to voluntarily submit to random drug testing. 75

104 282 Drug Free Community Support - enables coalitions of youth, parents and others to strengthen their coordination and prevention efforts, encourage citizen participation in substance abuse reduction efforts and disseminate information about effective program 283 Smaller Learning Community - personalizes the learning environment so students become more engaged in learning. 287 Drug Free Communities Support Mentoring Program Mentoring - supports and encourages the development of new, self-supporting, community anti-drug coalitions that are focused on the prevention of substance abuse in the new coalition's community. 288 Summer School Limited English Proficiency - provides summer school for students of limited English proficiency to support the administration of assessments or to carry out other activities related to ensuring that the State's schools and local education agencies are held accountable for results. 315 SSA - IDEA B - Discretionary (Deaf) - provides basic special education component and Regional Day School Programs for the deaf. 316 SSA - IDEA B - Formula (Deaf) - provides educational programs for children with disabilities. 317 SSA - IDEA B - Preschool (Deaf) - provides funds for preschool children with disabilities. 340 SSA - IDEA C - Early Intervention (Deaf) - provides direct services to hearing impaired infants to toddlers, ages birth through two years of age. 397 Advanced Placement Incentives - enhancement of Advanced Placement programs on specific campuses based on student scores on Advanced Placement examinations. 399 Investment Capital Funds - provides funds to help individual public school campuses implement practices and procedures consistent with school deregulation and school restructuring to improve involvement through staff development and training. 404 Student Success Initiative - provides targeted academic support in reading and mathematics for students not showing adequate progress in reading and mathematics development and who are at risk for reading difficulties, including dyslexia. 409 Basic Skills Programs for High School Students/High School Completion and Success - provides special programs for students in grade nine who are at risk of not earning sufficient credit or who have not earned sufficient credit to advance to grade 10 and who fail to meet minimum skills levels. 411 Technology Allotment - provides funds to purchase technological software or equipment that contributes to student learning or pay for training for educational personnel involved in the use of these materials. 423 Read To Succeed - provides funds generated through the sale of Read to Succeed license plates designed by a Texas student to purchase educational materials for public school libraries. 425 Tobacco Compliance grant - supports compliance education, enforcement, and reporting of activities to reduce Tobacco use in schools. 426 Department of State Health Services Strategic Prevention Framework - prevents underage binge drinking and alcohol related traffic fatalities as a way to build a safer healthier country. 428 High School Allotment - provides funding for an academically intense and high-quality program of study that provides students with the information and skills necessary to successfully enroll in entry-level courses at an institution of higher education without the need for developmental course work 434 SSA Visually Impaired - provides services to visually impaired students. 76

105 435 SSA - Regional Day School Deaf (State) - provides state funds for staff and activites of the Regional Day School Program for the deaf. 458 SSA - Regional Day School Deaf (Local) - provides local funds for activities of the Regional Day School Program for the deaf. 461 Campus Activity - proceeds from fundraising activities, vending sales, corporate and private donations to school-sponsored activities benefiting students and staff of the campus. 481 Indirect Cost Recovery - accounts for funds generated through allowable indirect costs for grant administration. 484 Verizon Grants - funds received through Verizon Foundation for the advancement of education and literacy. 486 Houston Endowment Grant - funds received through a private philanthropic foundation that improves life for the people in the greater Houston area through contributions to educational institutions. 492 Exxon Staff Development Grant - funds provided by Exxon to be used for staff development. 493 CCISD Education Foundation - provides innovative grant funds for District teachers. 494 Music Enrichment - funds received for music programs within the District. 495 Center Agriculture Science and Engineering - provides funds for the Longhorn project 496 NASA Grant - provides funding for robotic competition. 497 Science Donations - supports various District science projects. 498 After School Achievement - provides funds for enrichment activities for the period of time between the end of the regular school day and the end of the parents' work day. 77

106 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS August 31, 2007 Data Control Codes ESEA, Title IV - Safe & Drug Free ESEA, Title I, Pt A - Improving Basic Ed. IDEA B - Formula Assets 1110 Cash and cash equivalents $ $ $ Receivables: 1240 Receivables from other governments 756 6, , Due from other funds 1290 Other receivables 1000 Total Assets $ 756 $ 6,718 $ 141,406 Liabilities and Fund Balances Liabilities: Current Liabilities: 2110 Accounts payable $ 378 $ $ 87, Accrued wages payable 2170 Due to other funds 378 6,718 53, Due to other governments 2300 Deferred revenues 2000 Total Liabilities 756 6, ,406 Fund Balance: Reserved for: 3490 Other purposes Unreserved, undesignated reported in: 3610 Special revenue funds 3000 Total Fund Balance 4000 Total liabilities and fund balance $ 756 $ 6,718 $ 141,406 78

107 EXHIBIT G-1 Page 1 of ESEA, Title II, Pt A - IDEA-Part B Vocational Improving High Cost Risk Ed - Tech Vocational Teacher Pool Prep Ed - Basic Quality IDEA B - Preschool $ $ $ $ $ $ Public Charter School Grant 20,400 24,489 5, ,468 $ $ 20,400 $ $ 24,489 $ 5,000 $ 141,468 $ $ 20,376 $ $ 7,758 $ $ 91, ,731 5,000 50,115 20,400 24,489 5, ,468 $ $ 20,400 $ $ 24,489 $ 5,000 $ 141,468 79

108 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS August 31, Data Control Codes ESEA, Title II, Pt D - Ed. Technology ESEA, Title III, Pt A - BIL/ESL 21st Century CASE Assets 1110 Cash and cash equivalents $ $ $ Receivables: 1240 Receivables from other governments 16, Due from other funds 1290 Other receivables 1000 Total Assets $ $ $ 16,302 Liabilities and Fund Balances Liabilities: Current Liabilities: 2110 Accounts payable $ $ $ 2160 Accrued wages payable 2170 Due to other funds 16, Due to other governments 2300 Deferred revenues 2000 Total Liabilities 16,302 Fund Balance: Reserved for: 3490 Other purposes Unreserved, undesignated reported in: 3610 Special revenue funds 3000 Total Fund Balance 4000 Total liabilities and fund balance $ $ $ 16,302 80

109 EXHIBIT G-1 Page 2 of ESEA, Title V, Part A - Innovative C.L.E.A.R. Grant Drug Free Community Support Smaller Learning Communities Drug Free Community Support Mentoring Summer School LEP $ $ $ $ $ $ 19,496 17,337 92,416 11,558 $ $ 19,496 $ 17,337 $ 92,416 $ 11,558 $ $ $ 1,161 $ 814 $ 3,291 $ 558 $ 18,335 16,523 89,125 11,000 19,496 17,337 92,416 11,558 $ $ 19,496 $ 17,337 $ 92,416 $ 11,558 $ 81

110 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS August 31, Data Control Codes SSA - IDEA B - Discretionary (Deaf) SSA - IDEA B - Formula (Deaf) Assets 1110 Cash and cash equivalents $ $ $ Receivables: 1240 Receivables from other governments 1260 Due from other funds 1290 Other receivables 1000 Total Assets $ $ $ SSA - IDEA B - Preschool (Deaf) Liabilities and Fund Balances Liabilities: Current Liabilities: 2110 Accounts payable 2160 Accrued wages payable 2170 Due to other funds 2180 Due to other governments 2300 Deferred revenues 2000 Total Liabilities $ $ $ Fund Balance: Reserved for: 3490 Other purposes Unreserved, undesignated reported in: 3610 Special revenue funds 3000 Total Fund Balance 4000 Total liabilities and fund balance $ $ $ 82

111 EXHIBIT G-1 Page 3 of Texas High School Advanced Investment Student Completion Placement Capital Success and Success, Incentive Funds Initiative Cycle 3 SSA - IDEA C - Early Intervention (Deaf) Technology Allotment $ $ 42,224 $ $ $ $ 255,596 12,006 46,213 76,023 25,484 $ $ 42,224 $ 12,006 $ 46,213 $ 76,023 $ 281,080 $ $ 886 $ 5,197 $ $ 6,633 $ 58,009 6,809 46,213 69,390 41, ,071 42,224 12,006 46,213 76, ,080 $ $ 42,224 $ 12,006 $ 46,213 $ 76,023 $ 281,080 83

112 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS August 31, Data Control Codes Read To Succeed Tobacco Compliance Grant DSHS Strategic Prevention Assets 1110 Cash and cash equivalents $ $ 495 $ Receivables: 1240 Receivables from other governments 66, Due from other funds 1290 Other receivables 1000 Total Assets $ $ 495 $ 66,519 Liabilities and Fund Balances Liabilities: Current Liabilities: 2110 Accounts payable $ $ 495 $ 31, Accrued wages payable 2170 Due to other funds 34, Due to other governments 2300 Deferred revenues 2000 Total Liabilities ,519 Fund Balance: Reserved for: 3490 Other purposes Unreserved, undesignated reported in: 3610 Special revenue funds 3000 Total Fund Balance 4000 Total liabilities and fund balance $ $ 495 $ 66,519 84

113 EXHIBIT G-1 Page 4 of High School Allotment SSA - Visually Impaired SSA - Regional Day School Deaf (State) SSA - Regional Day School Deaf (Local) Campus Activity Funds Indirect Cost Recovery $ 713,624 $ $ 150 $ 302,849 $ 1,562,724 $ 430,139 76,060 31, , ,163 $ 789,684 $ $ 150 $ 334,817 $ 2,131,128 $ 430,139 $ 134,245 $ $ 150 $ 32,555 $ 121,403 $ , , , , , , ,195 2,009,725 2,009, ,195 $ 789,684 $ $ 150 $ 334,817 $ 2,131,128 $ 430,139 85

114 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS August 31, Data Control Codes Verizon Grants Houston Endowment Grant Exxon Staff Development Grant Assets 1110 Cash and cash equivalents $ 5,017 $ 7,245 $ 11,854 Receivables: 1240 Receivables from other governments 1260 Due from other funds 1290 Other receivables 1000 Total Assets $ 5,017 $ 7,245 $ 11,854 Liabilities and Fund Balances Liabilities: Current Liabilities: 2110 Accounts payable $ $ $ 2160 Accrued wages payable 2170 Due to other funds 2180 Due to other governments 2300 Deferred revenues 5,017 7,245 11, Total Liabilities 5,017 7,245 11,854 Fund Balance: Reserved for: 3490 Other purposes Unreserved, undesignated reported in: 3610 Special revenue funds 3000 Total Fund Balance 4000 Total liabilities and fund balance $ 5,017 $ 7,245 $ 11,854 86

115 EXHIBIT G-1 Page 5 of CCISD Education Foundation Music Enrichment Ctr Agriculture Science and Engineering NASA Grant Science Donations After School Achievement $ 138,888 $ 41,922 $ 7,021 $ $ 15,914 $ $ 138,888 $ 41,922 $ 7,021 $ $ 15,914 $ $ 2,952 $ 14,576 $ 2,160 $ $ 984 $ ,897 4,861 14, ,888 14,576 7,021 15,914 27,346 27,346 $ 138,888 $ 41,922 $ 7,021 $ $ 15,914 $ 87

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117 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT EXHIBIT G-1 COMBINING BALANCE SHEET Page 6 of 6 NONMAJOR GOVERNMENTAL FUNDS August 31, 2007 Data Control Codes Total Nonmajor Governmental Funds Assets 1110 Cash and cash equivalents $ 3,535,662 Receivables: 1240 Receivables from other governments 831, Due from other funds 441, Other receivables 127, Total Assets $ 4,935,685 Liabilities and Fund Balances Liabilities: Current Liabilities: 2110 Accounts payable $ 626, Accrued wages payable 84, Due to other funds 441, Due to other governments Deferred revenues 1,317, Total Liabilities 2,469,419 Fund Balance: Reserved for: 3490 Other purposes 456,541 Unreserved, undesignated reported in: 3610 Special revenue funds 2,009, Total Fund Balance 2,466, Total liabilities and fund balance $ 4,935,685 89

118 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - NONMAJOR GOVERNMENTAL FUNDS For the Year Ended August 31, 2007 Data Control Codes ESEA, Title IV - Safe & Drug Free ESEA, Title I, Pt A - Improving Basic Ed. IDEA B - Formula Revenues 5700 Local, Intermediate and Out-of-State $ $ $ 5800 State Program Revenues 5900 Federal Program Revenues 74, ,456 5,043, Total Revenues 74, ,456 5,043,116 Expenditures Current: 0011 Instruction 637,612 3,741, Instructional Resources and Media Services 0013 Curriculum and Instructional Staff Development 5, ,524 94, Instructional Leadership 107,118 6, School Leadership 1, Guidance, Counseling and Evaluation Services 68,192 1,131, Social work services 0033 Health Services 4, Student Transportation 64, Cocurricular/Extracurricular Activities 0041 General Administration 0051 Plant Maintenance and Operations 0061 Community Services 11, Total Expenditures 74, ,456 5,043, Excess (deficiency) of revenues over expenditures Other Financing Sources (Uses) 7915 Transfers in Total Other Financing Sources (Uses) 1200 Net change in fund balances 0100 Fund Balance - September 1 (Beginning) Prior period adjustment 3000 Fund Balance - August 31 (Ending) $ $ $ 90

119 EXHIBIT G-2 Page 1 of ESEA, Title II, Pt A - IDEA-Part B Improving High Cost Risk Vocational Ed - Vocational Ed - Teacher Pool Tech Prep Basic Quality IDEA B - Preschool $ $ $ $ $ $ Public Charter School Grant 65, ,209 10, , , ,415 65, ,209 10, , , ,415 58, ,925 4,952 90, , ,715 6, ,920 14, ,569 24, ,857 37,998 65, ,209 10, , , ,415 $ $ $ $ $ $ 91

120 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - NONMAJOR GOVERNMENTAL FUNDS For the Year Ended August 31, Data Control Codes ESEA, Title II, Pt D - Ed. Technology ESEA, Title III, Pt A - BIL/ESL 21st Century CASE Revenues 5700 Local, Intermediate and Out-of-State $ $ $ 5800 State Program Revenues 5900 Federal Program Revenues 9, , , Total Revenues 9, , ,774 Expenditures Current: 0011 Instruction ,730 83, Instructional Resources and Media Services 0013 Curriculum and Instructional Staff Development 9,873 92,888 1, Instructional Leadership 0023 School Leadership 31, Guidance, Counseling and Evaluation Services 0032 Social work services 0033 Health Services 0034 Student Transportation 0036 Cocurricular/Extracurricular Activities 0041 General Administration 0051 Plant Maintenance and Operations 0061 Community Services 6030 Total Expenditures 9, , , Excess (deficiency) of revenues over expenditures Other Financing Sources (Uses) 7915 Transfers in Total Other Financing Sources (Uses) 1200 Net change in fund balances 0100 Fund Balance - September 1 (Beginning) Prior period adjustment 3000 Fund Balance - August 31 (Ending) $ $ $ 92

121 EXHIBIT G-2 Page 2 of ESEA, Title V, Part A - Innovative C.L.E.A.R. Grant Drug Free Community Support Smaller Learning Communities Drug Free Community Support Mentoring Summer School LEP $ $ $ $ $ $ 52, ,354 90, ,570 37,946 18,447 52, ,354 90, ,570 37,946 18,447 17,501 15,579 80,462 18,447 2,373 64, , , ,014 29,792 2,610 33, , ,946 52, ,354 90, ,570 37,946 18, $ $ $ $ $ $ 93

122 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - NONMAJOR GOVERNMENTAL FUNDS For the Year Ended August 31, Data Control Codes SSA - IDEA B - Discretionary (Deaf) SSA - IDEA B - Formula (Deaf) SSA - IDEA B - Preschool (Deaf) Revenues 5700 Local, Intermediate and Out-of-State $ $ $ 5800 State Program Revenues 5900 Federal Program Revenues 70,219 46,156 9, Total Revenues 70,219 46,156 9,735 Expenditures Current: 0011 Instruction 70,219 46,156 9, Instructional Resources and Media Services 0013 Curriculum and Instructional Staff Development 0021 Instructional Leadership 0023 School Leadership 0031 Guidance, Counseling and Evaluation Services 0032 Social work services 0033 Health Services 0034 Student Transportation 0036 Cocurricular/Extracurricular Activities 0041 General Administration 0051 Plant Maintenance and Operations 0061 Community Services 6030 Total Expenditures 70,219 46,156 9, Excess (deficiency) of revenues over expenditures Other Financing Sources (Uses) 7915 Transfers in Total Other Financing Sources (Uses) 1200 Net change in fund balances 0100 Fund Balance - September 1 (Beginning) Prior period adjustment 3000 Fund Balance - August 31 (Ending) $ $ $ 94

123 EXHIBIT G-2 Page 3 of Texas High School Advanced Student Completion Placement Investment Success and Success, Incentive Capital Funds Initiative Cycle 3 SSA - IDEA C - Early Intervention (Deaf) Technology Allotment $ $ $ $ $ 35,620 $ 112,475 12, , , ,783 2,055 2, ,475 12, , , , ,517 3, ,661 91, ,635 1,665 22,958 8, ,071 31, ,456 3,020 33,000 2, , ,475 12, , , ,783 $ $ $ $ $ $ 95

124 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - NONMAJOR GOVERNMENTAL FUNDS For the Year Ended August 31, Data Control Codes Read To Succeed Tobacco Compliance Grant DSHS Strategic Prevention Revenues 5700 Local, Intermediate and Out-of-State $ $ $ 5800 State Program Revenues , , Federal Program Revenues 5020 Total Revenues , ,444 Expenditures Current: 0011 Instruction 7, Instructional Resources and Media Services Curriculum and Instructional Staff Development 0021 Instructional Leadership 0023 School Leadership 0031 Guidance, Counseling and Evaluation Services 0032 Social work services 0033 Health Services 0034 Student Transportation 0036 Cocurricular/Extracurricular Activities 0041 General Administration 0051 Plant Maintenance and Operations 0061 Community Services 6, , Total Expenditures , , Excess (deficiency) of revenues over expenditures Other Financing Sources (Uses) 7915 Transfers in Total Other Financing Sources (Uses) 1200 Net change in fund balances 0100 Fund Balance - September 1 (Beginning) Prior period adjustment 3000 Fund Balance - August 31 (Ending) $ $ $ 96

125 EXHIBIT G-2 Page 4 of High School Allotment SSA - Visually Impaired SSA - Regional Day School Deaf (State) SSA - Regional Day School Deaf (Local) Campus Activity Funds Indirect Cost Recovery $ $ $ $ 1,050,678 $ 2,724,886 $ 2,103,818 9, ,835 88,454 2,985 2,103,818 9, ,835 1,142,117 2,724,886 1,512,490 9, , , ,026 2, ,053 47,392 93,186 78, ,724 1,563 8,343 2,768, ,324 2,103,818 9, ,835 1,142,117 2,768, ,324 (43,671) (168,324) 116, ,355 (43,671) (51,969) 2,053, ,164 $ $ $ $ $ 2,009,725 $ 429,195 97

126 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - NONMAJOR GOVERNMENTAL FUNDS For the Year Ended August 31, Data Control Codes Verizon Grants Houston Endowment Grant Exxon Staff Development Grant Revenues 5700 Local, Intermediate and Out-of-State $ 10,142 $ $ 3, State Program Revenues 5900 Federal Program Revenues 5020 Total Revenues 10,142 3,271 Expenditures Current: 0011 Instruction 7, Instructional Resources and Media Services 0013 Curriculum and Instructional Staff Development 2,381 3, Instructional Leadership 0023 School Leadership 0031 Guidance, Counseling and Evaluation Services 0032 Social work services 0033 Health Services 0034 Student Transportation 0036 Cocurricular/Extracurricular Activities 0041 General Administration 0051 Plant Maintenance and Operations 0061 Community Services 6030 Total Expenditures 10,142 3, Excess (deficiency) of revenues over expenditures Other Financing Sources (Uses) 7915 Transfers in Total Other Financing Sources (Uses) 1200 Net change in fund balances 0100 Fund Balance - September 1 (Beginning) Prior period adjustment 3000 Fund Balance - August 31 (Ending) $ $ $ 98

127 EXHIBIT G-2 Page 5 of CCISD Education Foundation Music Enrichment Ctr Agriculture Science and Engineering NASA Grant Science Donations After School Achievement $ 94,932 $ 586,382 $ 32,659 $ 42,137 $ 32,300 $ 73,270 94, ,382 32,659 42,137 32,300 73,270 94,932 31,178 30,838 72, ,985 42,137 1,481 1, , ,985 32,659 42,137 32,300 73,270 (13,603) (13,603) 40,949 $ $ 27,346 $ $ $ $ 99

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129 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT EXHIBIT G-2 COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES Page 6 of 6 IN FUND BALANCE - NONMAJOR GOVERNMENTAL FUNDS For the Year Ended August 31, 2007 Data Control Codes Total Nonmajor Governmental Funds Revenues 5700 Local, Intermediate and Out-of-State $ 4,686, State Program Revenues 4,584, Federal Program Revenues 9,098, Total Revenues 18,369,723 Expenditures Current: 0011 Instruction 10,453, Instructional Resources and Media Services Curriculum and Instructional Staff Development 1,822, Instructional Leadership 511, School Leadership 118, Guidance, Counseling and Evaluation Services 1,461, Social work services 203, Health Services 42, Student Transportation 64, Cocurricular/Extracurricular Activities 3,413, General Administration 168, Plant Maintenance and Operations 8, Community Services 326, Total Expenditures 18,595, Excess (deficiency) of revenues over expenditures (225,598) Other Financing Sources (Uses) 7915 Transfers in 116,355 Total Other Financing Sources (Uses) 116, Net change in fund balances (109,243) 0100 Fund Balance - September 1 (Beginning) 522,113 Prior period adjustment 2,053, Fund Balance - August 31 (Ending) $ 2,466,

130 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT Exhibit H-1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - ORIGINAL BUDGET, AMENDED FINAL AND ACTUAL - NATIONAL SCHOOL BREAKFAST AND LUNCH For the Year Ended August 31, 2007 National School Breakfast and Lunch Budgeted Amounts Data Control Codes Original Final Operating Revenues 5700 Local revenues $ 7,635,316 7,635,316 Actual Amounts, Budgetary Basis Variance with Final Budget - Positive (Negative) $ $ 7,319,075 $ (316,241) Total operating revenues 7,635,316 7,635,316 7,319,075 (316,241) Operating Expenses 0035 Food services 10,731,621 10,801,621 9,764,022 1,037, Extracurricular activities 282, , ,258 76,300 Total operating expenses 11,014,179 11,084,179 9,970,280 1,113, Operating income (loss) (3,378,863) (3,448,863) (2,651,205) 797,658 Non-Operating Revenues (Expenses) 7020 Investment earnings 60,000 60, ,950 92, National School Breakfast 543, , ,523 54, National School Lunch 2,349,770 2,349,770 2,017,299 (332,471) 7954 U.S.D.A. donated commodities 375, , ,016 (3,941) 5800 State program revenues 50,000 50,000 53,726 (50,000) 8951 Miscellaneous expense (26,822) (26,822) Total non-operating revenues (expenses) 3,378,863 3,448,863 3,236,692 (265,897) Income (loss) before transfers 585, ,761 Transfers 7915 Operating transfers in 8911 Operating transfers out Change in net assets 585, ,761 Net assets - September 1 (beginning) 2,197,153 2,197,153 2,197,153 Net assets - August 31 (ending) $ 2,197,153 $ 2,197,153 $ 2,782,640 $ 531,

131 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT Exhibit H-2 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - ORIGINAL BUDGET, AMENDED FINAL AND ACTUAL - DEBT SERVICE FUND For the Year Ended August 31, 2007 Budgeted Amounts Data Control Codes Original Final Revenues 5700 Local revenues $ 37,839,000 37,839,000 Debt Service Actual Amounts, Budgetary Basis Variance with Final Budget - Positive (Negative) $ $ 38,793,335 $ 954,335 Total revenues 37,839,000 37,839,000 38,793, ,335 Expenditures Debt Service: 0071 Principal on long-term debt 13,735,000 13,735,000 13,735, Interest on long-term debt 24,965,000 24,965,000 24,843, ,208 Total expenditures 38,700,000 38,700,000 38,578, , Excess (deficiency) of revenues over expenditures (861,000) (861,000) 214,543 1,075,543 Net change in fund balances/net assets (861,000) (861,000) 214,543 1,075,543 Fund balances/net assets - beginning 4,011,295 4,011,295 4,011,295 Fund balances/net assets - ending $ 3,150,295 $ 3,150,295 $ 4,225,838 $ 1,075,

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133 NONMAJOR PROPRIETARY FUNDS ENTERPRISE FUNDS The Enterprise Funds are used to account for activities for which outside users are charged a fee roughly equal to the cost of providing the goods or services. Funds included in the Enterprise Funds are described below. Fund Number Fund Name & Description 701 National Breakfast and Lunch Program - accounts for budgeted food service operations. The District intends for the food service operations to be financed from the NSLP program and user charges. 711 Athletic Concessions - accounts for funds received from school district owned concession stands that serve the general public at school sponsored events. The primary intent of operations is to realize a profit as a result of sales. INTERNAL SERVICE FUNDS The Internal Serrvice Funds are used to account for the financing of goods or services provided by one organizational unit of the school district to other district organizational units on a cost reimbursement basis. Funds included in the Internal Service Funds are: Fund Number Fund Name & Description 753 Health Insurance Fund- accounts for the District sponsored modified self-insurance plan which provides health care benefits to staff members and their dependents. 771 Workers Compensation Insurance Fund - provides employees of the District with worker's compensation benefits which are self-funded from accumulated assets and provided directly from the District, which is the plan sponsor. 772 Disability Insurance Fund - provides employees of the District with short-term disability income benefits funded primarily through employee contributions. 773 Property Insurance Fund - accounts for the payment of property insurance premiums and is funded on a cost reimbursement basis. 105

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135 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT Exhibit I-1 COMBINING STATEMENT OF NET ASSETS NONMAJOR ENTERPRISE FUNDS August 31, 2007 National Breakfast and Lunch Assets Current assets: Cash and cash equivalents 2,211,814 Enterprise Funds Athletic Concessions $ $ 156,980 $ 2,368,794 Receivables: Due from other governments 56,094 56,094 Other current assets 42,319 42,319 Total current assets 2,310, ,980 2,467,207 Land, Buildings and Equipment: Building and improvements 126, ,535 Furniture and equipment 1,087,408 7,474 1,094,882 Accumulated depreciation - buildings (1,493) (1,493) Accumulated depreciation - Furniture and Equipment (147,818) (1,370) (149,188) Total non-current assets 1,064,632 6,104 1,070,736 Total Assets 3,374, ,084 3,537,943 Liabilities Current Liabilities: Accounts payable 279,222 12, ,725 Accrued wages payable 152, ,174 Due to other funds 160, ,823 Total current liabilities 592,219 12, ,722 Total Liabilities 592,219 12, ,722 Net Assets Investments in capital Assets, net of debt 1,064,632 6,104 1,070,736 Restricted for food service 1,718,008 1,718,008 Unrestricted net assets 144, ,477 Total Net Assets $ 2,782,640 $ 150,581 $ 2,933,221 Total 107

136 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT Exhibit I-2 COMBINING STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS NONMAJOR ENTERPRISE FUNDS For the Year Ended August 31, 2007 National Breakfast and Lunch Athletic Concessions Total Operating Revenues Charges for services $ 7,319,075 $ 80,567 $ 7,399,642 Total Operating Revenues 7,319,075 80,567 7,399,642 Operating Expenses Payroll costs 3,859,297 16,154 3,875,451 Purchased and contracted services 928,118 17, ,425 Supplies and materials 4,901,203 55,070 4,956,273 Other operating costs 201, ,028 Depreciation 80,634 1,370 82,004 Total operating expenses 9,970,280 89,901 10,060,181 Operating income (loss) (2,651,205) (9,334) (2,660,539) Non-Operating Revenues (Expenses) Investment earnings 152, ,950 National School Breakfast Program 597, ,523 National School Lunch Program 2,017,299 2,017,299 Donated Commodities 442, ,016 State program revenue 53,726 53,726 Miscellaneous expenses (26,822) (26,822) Total Non-operating revenues (expenses) 3,236,692 3,236,692 Change in Net Assets 585,487 (9,334) 576,153 Net assets - September 1 (beginning) 2,197, ,915 2,357,068 Net assets - August 31 (ending) $ 2,782,640 $ 150,581 $ 2,933,

137 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT Exhibit I-3 COMBINING STATEMENT OF CASH FLOWS NONMAJOR ENTERPRISE FUNDS For The Year Ended August 31, 2007 National Breakfast and Lunch Increase (Decrease) in Cash and Cash Equivalents Cash Flows from Operating Activities: Cash received from user charges 7,319, Athletic Concessions $ $ 80,567 $ 7,399,642 Cash payments to suppliers for goods and services (5,075,679) (67,346) (5,143,025) Cash payments to employees (3,978,885) (16,154) (3,995,039) Net Cash Provided by (Used for) Operating Activities (1,735,489) (2,933) (1,738,422) Cash Flows from Non-Capital Financing Activities: Advances to other funds (407,744) (407,744) Federal and state assistance - Food service and related 2,806,779 2,806,779 Net Cash Provided by (Used for) Non-Capital Financing Activities 2,399,035 2,399,035 Cash Flows from Capital and Related Financing Activities: Acquisition of capital assets (602,263) (7,474) (609,737) Net Cash Provided by (Used for) Capital and Related Financing Activities (602,263) (7,474) (609,737) Cash Flows from Investing Activities: Interest on investments 152, ,950 Net Cash Provided by Investing Activities 152, ,950 Net Increase in Cash and Cash Equivalents 214,233 (10,407) 203,826 Cash and Cash Equivalents at Beginning of Year 1,997, ,387 2,164,968 Cash and Cash Equivalents at End of Year $ 2,211,814 $ 156,980 $ 2,368,794 Reconcilation of Operating Income to Net Cash Provided by Operating Activities: Operating Income (Loss) $ (2,651,205) $ (9,334) $ (2,660,539) Adjustments to Reconcile Operating Income to Net Cash Provided by Operating Activities Depreciation 80,634 1,370 82,004 Donated commodities 442, ,016 Change in Assets and Liabilities: Decrease (increase) in Deferred Expenses 555, ,841 Increase (decrease) in Accounts Payable (43,187) 5,031 (38,156) Increase (decrease) in Accrued Wages Payable (119,588) (119,588) Net Cash Provided by (Used for) Operating Activities $ (1,735,489) $ (2,933) $ (1,738,422) Total Supplemental information: Non-cash transaction - Donated commodities received $ 442,016 $ $ 442,016 Total non-cash transactions $ 442,016 $ $ 442,

138 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT Exhibit I-4 COMBINING STATEMENT OF NET ASSETS NONMAJOR INTERNAL SERVICE FUNDS August 31, Workers Comp Disability Insurance Insurance Health Insurance Property Insurance Assets Current assets: Cash and cash equivalents $ 6,796,439 $ 1,203,697 $ 229,250 $ 4,553,274 $ 12,782,660 Receivables: Due from other funds 664, ,290 Other receivables 100, ,000 Deferred expenses 199,089 70, ,089 Total Current Assets 7,095,528 1,867, ,250 4,553,274 13,816,039 Total Assets 7,095,528 1,867, ,250 4,553,274 13,816,039 Liabilities Current Liabilities: Accounts payable 404,486 5,424 54, ,129 Accrued expenses 2,250, ,468 60,000 3,125,468 Total current liabilities 2,654, , ,219 3,589,597 Total Liabilities 2,654, , ,219 3,589,597 Net Assets Unrestricted net assets 4,441,042 1,047, ,031 4,553,274 10,226,443 Total Net Assets $ 4,441,042 $ 1,047,096 $ 185,031 $ 4,553,274 $ 10,226,443 Total 110

139 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT Exhibit I-5 COMBINING STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS NONMAJOR INTERNAL SERVICE FUNDS For the Year Ended August 31, Workers Comp Disability Insurance Insurance Health Insurance Property Insurance Total Operating Revenues Charges for services $ 20,130,456 $ 1,083,347 $ 437,742 $ 4,255,459 $ 25,907,004 Total operating revenues 20,130,456 1,083, ,742 4,255,459 25,907,004 Operating Expenses Purchased and contracted services 1,445, ,957 40,962 1,642,466 Supplies and materials 3,760 3,760 Claims expense and other operating expenses 17,889, , ,408 4,255,459 23,414,860 Total operating expenses 19,334,956 1,068, ,370 4,255,459 25,061,086 Operating Income (Loss) 795,500 15,046 35, ,918 Non-Operating Revenues (Expenses) Earnings - temporary deposits and investments 32,692 55,450 53, ,416 Total non-operating revenues (expenses) 32,692 55,450 53, ,416 Change in Net Assets 828,192 70,496 35,372 53, ,334 Net Assets - September 1 (Beginning) 3,612, , ,659 4,500,000 9,239,109 Net Assets - August 31 (Ending) $ 4,441,042 $ 1,047,096 $ 185,031 $ 4,553,274 $ 10,226,

140 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT COMBINING STATEMENT OF CASH FLOWS NONMAJOR INTERNAL SERVICE FUNDS For The Year Ended August 31, Workers Comp Insurance Health Insurance Disability Insurance Increase (Decrease) in Cash and Cash Equivalents Cash Flows from Operating Activities: Cash received from user charges $ 6,241,064 $ 19,261 $ 437,742 Cash received from interfund services provided 13,889,392 1,064,086 Cash payments for insurance claims (17,254,444) (749,878) (356,408) Cash payments to suppliers for goods and services (1,826,605) (322,393) (82,698) Net Cash Provided by (Used for) Operating Activities 1,049,407 11,076 (1,364) Cash Flows from Non-Capital Financing Activities: Advances from other funds 3,278,550 Advances to other funds (310,758) Net Cash Provided by (Used for) Non-Capital Financing Activities 3,278,550 (310,758) Cash Flows from Investing Activities: Interest on investments 32,692 55,450 Net Cash Provided by Investing Activities 32,692 55,450 Net Increase in Cash and Cash Equivalents 4,360,649 (244,232) (1,364) Cash and Cash Equivalents at Beginning of Year 2,435,790 1,447, ,614 Cash and Cash Equivalents at End of Year $ 6,796,439 $ 1,203,697 $ 229,250 Reconciliation of Operating Income to Net Cash Provided by operating Activities: Operating Income (Loss) $ 795,500 $ 15,046 $ 35,372 Adjustments to Reconcile Operating Income to Net Cash Provided by Operating Activities: Change in Assets and Liabilities: Decrease (increase) in Receivables (100,000) Decrease (increase) in Deferred Expenses (44,089) (40,000) Increase (decrease) in Accounts Payable 97,996 (3,970) (1,736) Increase (decrease) in Accrued Expenses 300,000 5,000 Net Cash Provided by (Used for) Operating Activities $ 1,049,407 $ 11,076 $ (1,364) 112

141 Exhibit I Property Insurance Total $ $ 6,698,067 4,255,459 19,208,937 (18,360,730) (4,255,459) (6,487,155) 1,059,119 4,500,000 7,778,550 (310,758) 4,500,000 7,467,792 53, ,416 53, ,416 4,553,274 8,668,327 4,114,333 $ 4,553,274 $ 12,782,660 $ $ 845,918 (100,000) (84,089) 92, ,000 $ $ 1,059,

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143 Compliance Schedules Compliance schedules are required by the Texas Education Agency and are not required disclosures in the Comprehensive Annual Financial Report. 115

144 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT SCHEDULE OF DELINQUENT TAXES RECEIVABLE For the Year Ended August 31, Net Assessed/Appraised Beginning Last Ten Tax Rates Value For School Balance Fiscal Years Maintenance Debt Service Tax Purposes 9/1/ and prior Various Various Various $ 626, ,083,021, , ,674,827, , ,267,869, , ,973,961, , ,593,862, , ,344,295, , ,894,418, , ,589,893,442 2,244, ,659,468, TOTALS $ 4,653,

145 Exhibit J a Current Maintenance Debt Service Entire Ending Year's Total Total Year's Balance Total Levy Collections Collections Adjustments 8/31/2007 $ $ 94,277 $ 12,441 $ $ 519,701 9,831 1, ,657 6, ,411 6,306 1,069 (887) 156,809 6,389 1,033 (2,090) 223,033 15,208 2,433 (1,044) 206,053 67,398 10,334 (7,655) 287,295 65,164 10,644 15, ,334 1,331, , ,240 1,071, ,349, ,403,474 37,534, ,263 2,543,514 $ 206,349,343 $ 168,006,610 $ 37,819,292 $ 539,428 5,716,270 Penalty and interest receivable on taxes 2,849,307 Total taxes receivable per Exhibit A-3 $ 8,565,

146 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT Exhibit J-2 SCHEDULE OF EXPENDITURES FOR COMPUTATION OF INDIRECT COSTS FOR GENERAL AND SPECIAL REVENUE FUNDS For the Year Ended August 31, 2007 (1) (2) (3) (4) (5) (6) (7) (other) Account Number Supt's Office School Board Tax Collection Direct Cost Indirect Cost Misc. Total 6100 Payroll Costs $ 301,153 $ 10,323 $ 196,567 $ $ 3,625,333 $ $ 4,133, Leave for Separating in Functions 41 and 53 2,720 2, Leave for Separating not in Functions 41 and , , Legal Services 420, , Audit Services 51,925 51, Tax Appraisal / Collection 1,443,349 1,443,349 Other Professional 621X Services 5,518 13,600 20, , , Education Service Centers 3,675 3, Maintenance and Repairs 79,938 79, Utilities 6260 Rentals 1,195 6, , , Miscellaneous Contracts ,150 44, Texbooks and Reading 410 3,472 6,898 10,780 63XX Other Supplies 2, ,676 51, , , Travel, Subsistence and Stipends 4,903 10,730 1,177 23,078 66, , Insurance and Bonding 137, , Election Expense 73,387 73, Miscellaneous Operating 15,057 14,773 1,165 10,594 83, , Capital Outlay Total $ 325,122 $ 535,503 $ 1,666,921 $ $ 4,481,595 $ 881,697 $ 7,890,838 Other Information: Total expenditures for General, Special Revenue and Food Service Enterprise Fund (Exhibits C-3 and D-2) (9) $ 248,909,757 Less: Deductions of Unallowable Costs: Fiscal Year Total Capital Outlay (6600) (10) $ 1,939,171 Total Debt & Lease (6500) (11) Plant Maintenance (Function 51, ) (12) 26,964,310 Food (Function 35, 6341 and 6499) (13) 3,704,705 Stipends (6413) (14) Column 5 above - Total Indirect Cost 4,481,595 Subtotal 37,089,781 Net Allowable Direct Cost $ 211,819,976 Cumulative: Total Cost of Buildings before Depreciation (1520) (15) $ 549,810,014 Historical Cost of Buildings over 50 years old (16) 9,707,392 Amount of Federal Money in building Cost (Net of #16) (17) 889,473 Total Cost of Furniture & Equipment before Depreciation (1530&1540) (18) 80,777,511 Historical Cost of Furniture & Equipment over 16 years old (19) 1,988,885 Amount of Federal Money in Furniture & Equipment (Net of #19) (20) 2,364,318 Note A: $67,950 in Function 53 expenditures are included in this report on administrative costs. 118

147 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT Exhibit J-3 OPTIMUM FUND BALANCE CALCULATION SCHEDULE (UNAUDITED) GENERAL FUND For the Year Ended August 31, Total General Fund Balance as of For the Year Ended August 31, 2007 (Exhibit C-1 object 3000 for the General Fund only) $ 53,491, Total Reserved Fund Balance as of For the Year Ended August 31, 2007 (from Exhibit C-1 - total of object 3400s for the General Fund only) 3,822, Total Designated Fund Balance (from Exhibit C-1 - total of object 3500s for the General Fund only) 5,908, Estimated amount needed to cover fall cash flow deficits in the General Fund (net of borrowed funds and funds representing deferred revenues) 2,536, Estimate of one month average cash disbursements during the regular school session (September 1, 2007 to May 31, 2008) 27,694, Estimate of delayed payments from state sources (58xx) including August payment delays 9,651, Estimate of underpayment from state sources equal to variance between Legislative Payment Estimate (LPE) and District Planning Estimate (DPE) or District s calculated earned state aid amount 8. Estimate of delayed payments from federal sources (59xx) 9. Estimate of expenditures to be reimbursed to General Fund from Capital Projects Fund (uses of General Fund cash after bond referendum and prior to issuance of bonds). 10. General Fund Optimum Fund Balance and Cash Flow ( ) 49,612, Excess or (Deficit) Undesignated Unreserved General Fund Fund Balance (1-10) $ 3,879,427 Due to the uncertainty of state funding, possible changes in the timing of state funding payments, and increased salary and benefit expenditures, the District believes that two months of average cash disbursements is necessary instead of the one month average used in item 5. The District is also planning for the opening of three new campuses in August 2009 and two new campuses in August The District's administration will continue to monitor the General Fund balance in the following budgetary cycles to maintain a fund balance level within District policy and state guidelines. 119

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149 Statistical Section (Unaudited) Statistical Tables are used to provide detailed data on the physical, economic, social and political characteristics of a government. They are intended to provide financial report users with a broader and more complete understanding of the government and its financial affairs than it is possible from the basic financial statements. The District s Statistical Tables usually cover ten fiscal years and often present data from outside the accounting records. The tables are unaudited due to the nature of the information contained therein. Page Financial Trends These schedules contain trend information to help the reader understand how the government s financial performance and well-being have changed over time. 127 Revenue Capacity The schedules contain information to help the reader assess the government s most significant local revenue source, the property tax. 136 Debt Capacity The schedules present information to help the reader assess the affordability of the government s current levels of outstanding debt and the government s ability to issue additional debt in the future. 143 Demographic and Economic Information The schedules offer demographic and economic indicators to help the reader understand the environment within which the government s financial activities take place. 152 Operating Information These schedules contain service and infrastructure data to help the reader understand how the information in the government s financial report relates to the services the government provides and the activities it performs

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151 Clear Creek Independent School District GENERAL INFORMATION REGARDING THE DISTRICT - (Unaudited) General Clear Creek Independent School District encompasses the communities of League City, Seabrook, Webster, Kemah, El Lago, Nassau Bay, Clear Lake Shores and Taylor Lake Village, along with portions of Bacliff, Friendswood, Houston and Pasadena. Clear Creek ISD encompasses parts of Galveston and Harris counties. Education The District serves over 36,300 students in grades pre-kindergarten through twelfth. The District operates twenty-four elementary schools, eight middle schools, four comprehensive high schools, and two alternative secondary campuses. Clear Creek ISD is now the 27 th largest of the 1,037 school districts in Texas. The District employs approximately 4,400 persons with over 2,450 teachers. Economy Major sectors of the area s economic base include aerospace (NASA), petro chemicals, health care, upscale commercial, boating and visitor attractions. The area includes a well-educated and highly technical workforce and a diverse and expanding economic base. Numerous shopping centers, malls, other retail establishments, and a wide variety of service oriented businesses are located within the District, and offer a complement to industry within the District. 123

152 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT NET ASSETS BY COMPONENT LAST SIX FISCAL YEARS * (Accrual Basis of Accounting) Governmental Activities: Invested in Capital Assets, Net of Related Debt $ 71,589,986 $ 16,425,310 $ 26,156,986 Restricted 9,361,244 45,239,128 25,567,205 Unrestricted 55,060,279 56,087,164 50,979,730 Total Governmental Activities Net Assets 136,011, ,751, ,703,921 Business-type Activities: Invested in Capital Assets, Net of Related Debt 1,070, ,825 Restricted 1,711,904 1,627,328 1,534,251 Unrestricted 150, , ,231 Total Business-type Activities Net Assets 2,933,221 2,357,068 1,686,482 Primary Government: Invested in Capital Assets, Net of Related Debt 72,660,722 16,995,135 26,156,986 Restricted 11,073,148 46,866,456 27,101,456 Unrestricted 55,210,860 56,247,079 51,131,961 Total Primary Government Net Assets $ 138,944,730 $ 120,108,670 $ 104,390,403 * Ten year comparative data has been omitted prior to the implementation of GASB Statement No. 34 in the fiscal year ended August 31,

153 Table $ 22,827,283 $ 28,501,275 $ 17,530,974 13,406,975 8,611,020 18,937,957 48,325,352 30,059,167 28,761,527 84,559,610 67,171,462 65,230,458 1,282,015 1,006, , , , ,846 1,404,538 1,140, ,925 22,827,283 28,501,275 17,530,974 14,688,990 9,617,529 19,660,036 48,447,875 30,193,576 28,888,373 $ 85,964,148 $ 68,312,380 $ 66,079,

154 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT CHANGES IN NET ASSETS LAST SIX FISCAL YEARS * (Accrual Basis of Accounting) Expenses: Governmental Activities: Instruction $ 158,776,037 $ 151,777,860 $ 138,338,317 Instructional Resources and Media Services 4,496,393 4,271,647 3,492,488 Curriculum and Instructional Staff Development 4,223,454 4,059,134 2,696,095 Instructional Leadership 2,560,644 2,240,055 3,026,525 School Leadership 14,543,396 13,482,018 12,146,337 Guidance, Counseling, and Evaluation Services 9,235,319 8,527,125 7,579,493 Social Work Services 363, , ,442 Health Services 2,354,294 2,323,136 2,032,943 Student (Pupil) Transportation 8,281,296 8,190,311 7,242,908 Food Services 367, , ,600 Cocurricular/Extracurricular Activities 8,275,702 7,556,005 6,862,976 General Administration 7,977,884 7,364,736 6,311,067 Plant Maintenance and Operations 31,436,161 26,636,699 23,134,308 Security and Monitoring Services 2,210,648 1,912,352 1,395,374 Data Processing Services 4,193,126 4,329,087 4,116,333 Community Services 474, , ,918 Debt Service - Interest on Long-term Debt 27,101,812 26,449,372 23,542,304 Debt Service - Bond Issuance Costs and Fees 20,559 7,500 20,543 Facilities Acquisition and Construction 381,582 1,022, ,514 Payments Related to Shared Service Arrangements 502, ,530 54,120 Payments to Juvenile Justice Alternative Ed. Prog. 102,381 13,713 83,322 Payments to Tax Increment Fund 1,002, , ,256 Total Governmental Activities Expenses 288,881, ,641, ,607,183 Business-type Activities: Enterprise Fund - National School Breakfast and Lunch 9,997,102 9,668,104 9,443,723 Enterprise Fund - Athletic Concessions 89,901 54,896 66,567 Total Business-type Activities Expenses 10,087,003 9,723,000 9,510,290 Total Primary Government Expenses 298,968, ,364, ,117,473 Program Revenues: Governmental Activities: Charges for Services: Instruction 1,447,355 1,485,154 1,368,823 Cocurricular/Extracurricular Activities 3,588,428 3,270,386 3,082,950 Plant Maintenance and Operations 400, , ,734 Other Activities 262, , ,457 Operating Grants and Contributions 22,515,267 28,965,039 23,096,323 Total Governmental Activities Program Revenues $ 28,214,439 $ 34,362,481 $ 28,133,

155 Table 2 Page 1 of $ 129,440,871 $ 128,301,863 $ 116,470,050 3,220,364 3,374,354 3,477,255 1,748,826 1,544,374 1,054,227 2,575,088 2,423,079 2,522,511 10,961,631 10,822,382 9,750,163 7,222,723 7,266,766 6,732, , , ,052 1,995,399 2,064,297 1,790,758 5,989,494 6,602,429 5,557,007 83, ,058 27,210 6,417,187 6,176,200 5,370,002 6,347,059 6,465,639 6,198,548 20,882,919 21,386,378 21,323, , , ,640 4,104,658 3,614,915 2,841, , , ,523 18,002,038 16,340,811 17,647,312 16,169 19, ,097 1,830,453 48,494 51,085 50,124 39,592 89,440 48, , ,347 48, ,152, ,740, ,949,313 8,437,387 7,985,293 8,130,552 62,316 45,874 52,377 8,499,703 8,031,167 8,182, ,652, ,772, ,132,242 1,452,575 1,259, ,143 2,785,236 2,623,893 2,241, , , , , , ,903 20,418,934 22,628,115 18,404,312 $ 25,212,789 $ 27,213,998 $ 22,139,

156 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT CHANGES IN NET ASSETS LAST SIX FISCAL YEARS * (Accrual Basis of Accounting) Program Revenues (Continued): Business-type Activities: Charges for Services: Enterprise Fund - National School Breakfast and Lunch $ 7,319,075 $ 7,250,418 $ 6,815,731 Enterprise Fund - Athletic Concessions 80,567 62,580 96,275 Operating Grants and Contributions: Enterprise Fund - National School Breakfast and Lunch 3,110,564 2,920,514 2,829,656 Total Business-type Activities Program Revenues 10,510,206 10,233,512 9,741,662 Total Primary Government Program Revenues 38,724,645 44,595,993 37,874,949 Net (Expense) / Revenue: Governmental Activities (260,666,890) (238,279,214) (216,473,896) Business-type Activities 423, , ,372 Total Primary Government Net (Expense) / Revenue (260,243,687) (237,768,702) (216,242,524) General Revenues and Other Changes in Net Assets: Governmental Activities: Property Taxes $ 210,879,647 $ 207,770,478 $ 190,768,866 Gifts and Bequests 9,377,814 State Aid - Formula Grants 54,161,494 31,828,105 27,866,853 Unrestricted Grants and Contributions 113,352 49,594 1,535,363 Investment Earnings 11,373,275 10,717,858 6,099,032 Miscellaneous Income 345, ,223 Gain (Loss) on Asset Disposition 34,354 (1,029,721) Gain on Escrow Swap Total Governmental Activities 276,873, ,610, ,618,207 Business-type Activities: Unrestricted Grants and Contributions 15,000 Investment Earnings 152,950 78,155 50,572 Total Business-type Activities: 152,950 93,155 50,572 Total Primary Government 277,026, ,703, ,668,779 Change in Net Assets Governmental Activities 16,206,511 12,331,398 18,144,311 Business-type Activities 576, , ,944 Total Primary Government $ 16,782,664 $ 12,935,065 $ 18,426,255 * Ten year comparative data has been omitted prior to the implementation of GASB Statement No. 34 in the fiscal year ended August 31,

157 Table 2 Page 2 of $ 6,444,969 $ 6,202,051 $ 6,297,264 50,430 53,437 68,766 2,251,716 2,050,044 1,834,239 8,747,115 8,305,532 8,200,269 33,959,904 35,519,530 30,340,217 (195,939,865) (191,526,944) (181,809,365) 247, ,365 17,340 (195,692,453) (191,252,579) (181,792,025) $ 180,166,106 $ 167,731,742 $ 156,032,994 91, ,957 24,552,844 22,401,038 25,522,986 3,221,040 1,409, ,947 2,128,834 1,631,834 5,307,814 55,894 14, ,080 (224,675) (208,902) 3,336, ,328, ,467, ,019,821 16,208 17,628 18,407 16,208 17,628 18, ,344, ,485, ,038,228 17,388,149 1,941,004 6,210, , ,993 35,747 $ 17,651,769 $ 2,232,997 $ 6,246,

158 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT FUND BALANCES OF GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (Modified Accrual Basis of Accounting) General Fund Reserved $ 3,822,154 $ 3,948,090 $ 2,754,344 $ 3,719,962 Unreserved 49,669,792 47,325,075 46,243,541 42,027,225 Total General Fund $ 53,491,946 $ 51,273,165 $ 48,997,885 $ 45,747,187 All Other Governmental Funds Reserved $ 110,342,617 $ 116,097,334 $ 183,368,901 $ 151,074,534 Unreserved, Reported in: Special Revenue Funds 2,009,725 2,053,396 1,624,195 1,250,567 Total All Other Governmental Funds $ 112,352,342 $ 118,150,730 $ 184,993,096 $ 152,325,101 Note: Prior to the year ended August 31, 2001, campus activity funds were reported in the General Fund. 130

159 Table $ 3,488,866 $ 5,357,745 $ 1,400,258 $ 3,410,712 $ 4,601,997 $ 5,754,450 25,607,440 21,440,237 26,673,943 25,127,229 24,843,065 21,268,636 $ 29,096,306 $ 26,797,982 $ 28,074,201 $ 28,537,941 $ 29,445,062 $ 27,023,086 $ 55,584,365 $ 47,845,520 $ 75,950,035 $ 130,431,471 $ 11,711,573 $ 36,105,344 1,160, , ,686 $ 56,745,079 $ 48,842,515 $ 76,935,721 $ 130,431,471 $ 11,711,573 $ 36,105,

160 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (Modified Accrual Basis of Accounting) Revenues: Local and Intermediate Sources $ 225,018,438 $ 223,904,073 $ 211,931,434 $ 187,569,425 State Program Revenues 66,891,490 45,891,803 42,796,507 40,545,960 Federal Program Revenues 9,758,514 14,872,547 9,197,133 7,337,974 Total Revenues 301,668, ,668, ,925, ,453,359 Expenditures: Instruction 145,235, ,655, ,794, ,494,359 Instructional Resources and Media Services 4,088,796 3,902,016 3,265,247 2,996,790 Curriculum and Instructional Staff Development 3,996,978 3,862,979 2,696,407 1,756,129 Instructional Leadership 2,369,510 2,088,390 2,811,039 2,406,275 School Leadership 13,209,344 12,292,513 11,133,385 10,174,034 Guidance, Counseling, and Evaluation Services 8,511,801 7,902,511 7,020,521 6,754,177 Social Work Services 348, , , ,226 Health Services 2,140,439 2,129,324 1,864,308 1,847,273 Student (Pupil) Transportation 8,449,346 8,275,315 10,539,421 6,642,008 Food Services 431, , ,688 83,310 Cocurricular/Extracurricular Activities 8,001,470 7,285,229 6,633,115 6,353,066 General Administration 7,248,738 6,735,013 6,318,991 6,276,596 Plant Maintenance and Operations 30,116,882 25,557,286 21,581,641 19,475,064 Security and Monitoring Services 2,042,964 1,857,613 1,430, ,836 Data Processing Services 3,984,284 3,967,154 3,930,244 3,835,431 Community Services 460, , , ,168 Debt Service - Principal on Long-term Debt 13,735,000 11,226,741 11,382,719 9,958,867 Debt Service - Interest on Long-term Debt 24,843,792 25,689,024 19,083,042 18,208,938 Debt Service - Bond Issue Costs and Fees 404, , ,186 1,975,766 Facilities Acquisition and Construction 61,746, ,040,542 97,744,450 32,565,930 Payments to Fiscal Agent/Member Districts of SSA 502, ,530 54,120 48,494 Payments to Juvenile Justice Alternative Ed. Prog. 102,381 13,713 83,322 39,592 Payments to Tax Increment Fund 1,002, , , ,857 Total Expenditures 342,974, ,156, ,428, ,952,186 Excess of Revenue Over (Under) Expenditures (41,305,656) (88,488,148) (74,503,889) (18,498,827) Other Financing Sources (Uses): Transfers in 17,116,355 12,253,267 14,269,730 14,017 Transfers (Out) (17,116,355) (16,820,187) (14,269,730) (14,017) Bonds Issued 37,135,000 27,885, ,000, ,000,000 Refunding Bonds Issued 129,370,097 Premium or Discount on Issuance of Bonds 585, ,425 1,015,982 16,052,389 Payments to Refunded Bonds Escrow Agent (143,145,471) Escrow Swap 3,336,651 Capital Leases Sale of Real and Personal Property 5,409 34,354 32,972 26,212 Total Other Financing Sources (Uses) 37,726,049 23,491, ,048, ,639,878 Net Change in Fund Balances $ (3,579,607) $ (64,996,289) $ 35,545,065 $ 112,141,051 Debt Service as a Percentage of Noncapital Expenditures 16.1% 16.2% 14.9% 15.8% Note: Debt service as a percentage of noncapital expenditures is determined by dividing debt service expenditures by total expenditures less debt service and and facilities acquisition and construction expenditures. 132

161 Table $ 174,298,744 $ 165,703,383 $ 154,436,089 $ 133,775,135 $ 124,870,186 $ 115,526,363 39,678,117 38,487,185 36,468,527 33,744,535 27,165,100 27,017,660 6,749,976 5,743,137 4,062,182 3,380,646 3,096,255 2,257, ,726, ,933, ,966, ,900, ,131, ,801, ,453, ,363, ,038,367 95,209,708 84,191,439 80,527,791 3,115,619 3,277,224 2,799,336 3,039,162 2,681,501 2,218,150 1,551,545 1,164, , , , ,696 2,270,826 2,365,945 2,282,421 1,893,066 1,580,001 1,103,718 9,991,154 9,077,638 8,466,722 7,703,359 7,288,449 7,073,300 6,791,116 6,284,248 5,772,204 5,506,556 5,565,511 5,018, , , , , , ,601 1,903,312 1,669,851 1,598,510 1,373,378 1,234,719 1,215,519 7,391,393 5,174,038 5,538,955 4,981,502 4,538,339 3,412, ,394 24,284 6,031,796 5,251,923 5,142,217 4,841,639 4,755,331 2,925,416 6,827,056 9,244,338 13,628,788 7,296,964 4,404,969 5,005,266 19,974,363 19,999,396 19,176,035 19,353,721 16,362,122 15,050, , , , , , ,640 3,862,372 3,373,885 2,301,381 1,012, , , , , , ,158 97,630 72,166 10,291,692 8,825,743 4,346,722 6,930,230 7,087,119 6,835,000 16,846,086 15,787,524 20,560,015 10,464,346 9,525,689 8,768,766 1,015,104 24,340 1,339,716 14, ,732 23,292,438 36,891,513 53,206,774 16,297,424 26,295,218 16,562,489 51,085 50,124 40,710 34,388 25,938 89,440 48,824 29, ,347 48, ,625, ,019, ,927, ,923, ,677, ,928,997 (21,898,359) (30,086,216) (54,960,876) (18,023,164) (22,545,996) (13,127,613) 164, ,338 5,130,012 (164,337) (121,338) (5,130,012) 27,600, ,037,531 76,518,415 5,613,790 61,569,938 7,369,015 (80,981,619) (4,858,720) (63,488,188) 1,399, ,165 29,962 14,700 43,340 42,029 31,935,527 14, ,835, ,194 (1,918,250) $ 10,037,168 $ (30,086,216) $ (54,946,176) $ 117,812,777 $ (21,971,802) $ (15,045,863) 14.7% 13.8% 14.5% 12.2% 12.3% 12.6% 133

162 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT REVENUE BY SOURCE FOR GOVERNMENTAL FUNDS * LAST TEN FISCAL YEARS (Modified Accrual Basis of Accounting) Revenues from Local and Intermediate Sources: Ad Valorem Penalties, Interest and Other Related Income $ 1,733,490 $ 1,637,354 $ 1,543,651 $ 1,491,168 Ad Valorem Taxes 205,873, ,901, ,407, ,697,255 Cocurricular / Student Activities 3,063,790 3,246,734 1,938,023 1,994,844 Donations 714, ,458 9,882, ,789 Facility Rental 389, , , ,493 Investment Income 11,231,859 10,652,075 6,060,605 2,091,049 SSA - Member Districts 1,084,571 1,249,008 1,056,227 1,019,331 Tuition 435, , , ,201 Other Revenues from Local and Intermediate Sources 491, ,632 1,253, ,295 Total Revenue from Local and Intermediate Sources 225,018, ,904, ,931, ,569,425 State Program Revenues: Available School Fund (Per Capita) 12,024,795 10,548,480 12,009,187 10,290,787 Debt Allotment 807, ,729 2,915,073 Foundation School Formula 42,385,551 21,534,637 17,679,472 16,099,126 SSA - Regional Day School for the Deaf 895, , , ,185 Student Success Initiative 449, , , ,492 Technology Allotment 690, , , ,749 Telecommunications Infrastructure Program Texas Reading Initiative 21,843 28,157 TRS Employee Health Insurance 1,752,542 1,645,835 1,678,000 TRS On-behalf Revenue 9,943,316 8,663,499 8,243,859 7,408,594 Other State Program Revenues ** 502, , , ,954 Total State Program Revenues 66,891,490 45,891,803 42,796,507 40,545,960 Federal Program Revenues: ESEA Title I A, Improving Basic Education 910, , ,836 1,017,540 ESEA Title II A, Training and Recruiting 642, , , ,883 ESEA Title III A, English Language Acquisition 344, , , ,768 ESEA, Title VI, Class Size Reduction IDEA Part B, Formula 5,043,116 5,801,646 5,312,614 3,998,538 Smaller Learning Communities Grant 476, , , ,823 Public Charter School Grant 463,415 Temporary Emergency Impact Aid 3,959,045 Medicaid MAC and SHARS 341, ,365 Other Federal Program Revenue ** 1,536,672 2,108,305 1,643,817 1,420,422 Total Federal Program Revenues 9,758,514 14,872,547 9,197,133 7,337,974 Total Reveues for Governmental Funds $ 301,668,442 $ 284,668,423 $ 263,925,074 $ 235,453,359 * This schedule is prepared in lieu of a Schedule of Tax Revenues by Source, as all tax revenues received by the District are Ad Valorem Taxes. ** Individual local, state and federal programs in excess of $300,000 are reported separately in this schedule. All others are combined as Other Local, State or Federal Program Revenues. Additionally, prior year information is not restated for programs or grants that exceed $300,000 in a subsequent year, the amounts remain in Other Local, State or Federal Program Revenues. *** This schedule includes all Governmental Fund Types and excludes all Enterprise, Internal Service and Fiduciary fund types. 134

163 Table $ 1,271,325 $ 1,184,573 $ 1,043,555 $ 923,882 $ 791,510 $ 744, ,313, ,718, ,755, ,088, ,201, ,198,842 1,952,740 1,728,793 1,096,116 2,923,500 2,491,048 1,077, , , , , , , , , , , ,444 1,625,112 5,245,128 11,491,059 6,877,723 4,173,791 5,685, , , , , ,164 90, , , , , , ,817 1,059,167 1,080, , , , , ,298, ,703, ,436, ,775, ,870, ,526,363 10,910,725 6,650,832 7,314,269 6,930,721 8,179,396 7,175,634 2,888,350 3,846,318 3,332,967 2,356, ,069 11,490,313 16,756,266 16,181,225 15,906,417 11,354,352 12,538, , , , , , , , , , , , , , , , ,682 1,340, ,903 13, ,264 3,735,750 7,472,087 7,183,385 6,762,596 6,319,755 5,654,803 5,484, , , , , , ,937 39,678,117 38,487,185 36,468,527 33,744,535 27,165,100 27,017,660 1,004, , , , , , , , , , ,305 3,365,601 2,260,940 1,291,655 1,060,794 1,104, ,449 1,598,516 1,557,373 1,536,255 1,396,776 1,099, ,648 6,749,976 5,743,137 4,062,182 3,380,646 3,096,255 2,257,361 $ 220,726,837 $ 209,933,705 $ 194,966,798 $ 170,900,316 $ 155,131,541 $ 144,801,

164 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT ASSESSED VALUE AND ACTUAL VALUE OF TAXABLE PROPERTY LAST TEN FISCAL YEARS Fiscal Year Less: Ended Real Property Personal Value of August 31, Land Improvements Property Frozen Accounts 1998 $ 2,067,374,878 $ 5,592,328,705 $ 1,003,565,372 $ (37,078,178) ,178,962,128 5,889,815,545 1,008,361,667 (44,493,814) ,344,673,965 6,353,085,638 1,074,274,665 (55,407,241) ,473,979,331 6,853,213,686 1,190,464,301 (81,927,870) ,683,519,257 7,442,002,346 1,117,899,019 (147,112,695) ,803,846,819 8,007,266,803 1,178,852,523 (157,965,114) ,086,971,802 8,545,327,390 1,287,241,804 (182,818,323) ,255,359,397 8,956,594,367 1,342,949,695 (206,242,234) ,400,859,257 10,498,814,129 1,383,483,372 (243,021,690) ,566,393,163 11,352,514,492 1,547,023,987 (266,590,015) (1) Tax rates are per $100 of taxable assessed value. Source: Galveston Central Appraisal District. 136

165 Table 6 Estimated Less: Total Taxable Total Actual Assessed Value Tax Exempt Assessed Total Direct Taxable as a Percentage Real Property Value Tax Rate (1) Value of Actual Value $ (1,847,861,218) $ 6,778,329,559 $ $ 8,663,268,955 78% (2,002,170,995) 7,030,474, ,077,642,730 77% (2,102,478,805) 7,614,148, ,770,692,708 78% (2,249,787,493) 8,185,941, ,517,657,318 78% (2,115,473,199) 8,980,834, ,243,420,622 80% (2,250,012,922) 9,581,988, ,989,966,145 80% (2,390,022,461) 10,346,700, ,919,540,996 80% (2,483,016,160) 10,865,645, ,554,903,459 80% (3,423,682,843) 11,616,452, ,256,629,697 76% (3,567,457,417) 12,631,884, ,465,931,642 77% 137

166 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT PROPERTY TAX RATES - DIRECT AND OVERLAPPING* GOVERNMENTS (PER $100 OF ASSESSED VALUE) LAST TEN FISCAL YEARS Taxing Authority Overlapping Rates: Baybrook MUD # Brazoria County MUD # Clear Brook City MUD Clear Lake City Water Authority Clear Lake City Water Authority (HCMUD 181) Clear Lake City Water Authority (HCWCID 75) Clear Lake Shores, City of Friendswood, City of Galveston County Galveston County MUD # Galveston County MUD # Galveston County MUD # Galveston County MUD # Galveston County MUD # Galveston WC&ID # Harris County Harris County Dept of Eductaion Harris County Flood Control District Harris County MUD # Harris County MUD # (1) Harris County Toll Road Authority Harris County WC&ID # (1) Harris County WC&ID # Houston, City of Kemah, City of League City, City of Nassau Bay, City of Pasadena, City of Port of Houston Authority Seabrook, City of South Shore Harbour MUD # South Shore Harbour MUD # South Shore Harbour MUD # South Shore Harbour MUD # Tara Glen MUD Taylor Lake Village, City of Webster, City of Total District Direct Rates: Maintenance and Operations Debt Service Total District Direct Rates (1) Unable to obtain tax rate information. Source: Galveston Central Appraisal District and Harris County Appraisal District. Note: State of Texas law limits the tax rate District's may assess for Maintenance and Operations to $ per $100 of assessed valuation. 138

167 Table (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) (1) (1)

168 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT Table 8 PRINCIPAL TAXPAYERS August 31, Taxable Percentage of Taxable Percentage of Assessed Total Taxable Assessed Total Taxable Taxpayer Value Rank Assessed Value Value Rank Assessed Value Coral Energy Resources $ 354,572, % Not Available (1) 0.00% Baybrook Mall, L.P. 129,981, % 64,020, % Nova Chemicals 102,943, % Not Available (1) 0.00% Kinder Morgan Tejas Pipeline, L.P. 79,565, % Not Available (1) 0.00% Total Petrochemicals USA, Inc. 76,687, % Not Available (1) 0.00% American Acryl, L.P. 72,301, % Not Available (1) 0.00% Centerpoint Energy, Inc. 69,942, % $ 89,878, % Lyondell Chemical Co. 50,487, % Not Available (1) 0.00% Celanese Ltd. 42,936, % $ 57,926, % The Boeing Co. 37,500, % 9,789, % Exxon Corporation 26,812, % 119,242, % Huntsman Chemical Corporation Not Available (1) 0.00% 71,838, % Fina, Inc. Not Available (1) 0.00% 70,238, % Baytank, Inc. 28,104, % 46,278, % Southwestern Bell Telephone Company 27,870, % 42,044, % Gables Realty Ltd. Partnership Not Available (1) 0.00% 32,831, % Tejas Gas Pipeline Co. Not Available (1) 0.00% 32,192, % $ 1,099,707, % $ 636,280, % (1) Taxpayer either did not exist or merged with another taxpayer, therefore taxable assessed values and ranking is not available. (2) Taxpayer was not ranked in the top 20 of all District taxpayers. Source: Galveston Central Appraisal District 140

169 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT Table 9 PROPERTY TAX LEVIES AND COLLECTIONS LAST TEN FISCAL PERIODS Collected Within the Fiscal Year Total Tax Fiscal Year of the Levy Collections Total Collections to Date (2) Ended Levy * for Percentage of in Subsequent Percentage of August 31, Fiscal Year (1) Amount Levy Years Amount Levy 1998 $ 109,032,063 $ 106,386, % $ 2,576,505 $ 108,962, % ,193, ,311, % 2,771, ,083, % ,740, ,348, % 3,266, ,614, % ,866, ,518, % 4,191, ,709, % ,733, ,085, % 1,424, ,510, % ,172, ,706, % 1,259, ,966, % ,802, ,929, % 1,585, ,514, % ,763, ,670, % 1,619, ,290, % ,595, ,947, % 1,575, ,523, % ,481, ,938, % 203,938, % (1) Appraised value less exemptions equal taxable assessed value. The beginning taxable value net of adjustments times the tax rate set by the District's Board of Trustees each fall equals the total net tax levy. The net tax levy for prior years reflects ongoning adjustments applied to that year's tax levy. (2) Excludes the subsequent 60 days tax collections recorded as revenue in the fund financial statements in accordance with the Modified Accrual Basis of Accounting. 141

170 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT RATIOS OF OUTSTANDING DEBT BY TYPE LAST TEN FISCAL YEARS Governmental Activities Schoolhouse Total Fiscal and Refunding Loans Capital Retirement Primary Year Bonds Payable Leases Incentive Government 1998 $ 177,932,264 $ 235,000 $ 526,775 $ 1,599,185 $ 180,293, ,392, ,063 2,351, ,639, ,208, ,282 1,012, ,972, ,253, ,730 12, ,864, ,670, , ,108, ,878,321 1,363, ,241, ,103,720 1,046, ,149, ,437, , ,150, ,897, ,897, ,196, ,196,318 Note: Details regarding the District's outstanding debt can be found in the notes to the financial statements (1) See Table 6 for assessed value information. (2) See Table 17 for student enrollment. 142

171 Table 10 Ratio of Debt Debt Debt to Assessed per per Value (1) Capita Student (2) 2.66% $ 1,030 $ 4, % 975 3, % 1,661 6, % 1,588 6, % 1,558 6, % 1,586 5, % 2,051 5, % 2,481 6, % 2,591 7, % 2,574 Avail. 03/

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173 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT Table 11 RATIOS OF NET GENERAL OBLIGATION BONDED DEBT OUTSTANDING LAST TEN FISCAL YEARS Percentage of Schoolhouse Estimated and Refunding Less: Amounts Actual Taxable Net Bonded Fiscal Bonds Available in Debt Value of Debt per Year Outstanding Service Fund Total Property (1) Student (2) 1998 $ 177,932,264 $ 4,299,485 $ 173,632, % $ 4, ,392,525 5,477, ,915, % 3, ,208,755 5,929, ,279, % 6, ,253,772 5,348, ,905, % 6, ,670,352 6,741, ,928, % 5, ,878,321 7,247, ,630, % 5, ,103,720 8,696, ,407, % 5, ,437,453 6,622, ,815, % 6, ,897,784 4,011, ,886, % 7, ,196,318 4,225, ,970, % Avail. 03/2008 (1) See Table 6 for assessed value information. (2) See Table 17 for student enrollment. 145

174 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT Table 12 COMPUTATION OF ESTIMATED DIRECT AND OVERLAPPING DEBT Page 1 of 2 For the Year Ended August 31, 2007 Amount of Net Debt Percentage Overlapping Governmental Unit Amount As Of Overlapping Debt Cities: Friendswood $ 19,085,000 6/1/ % $ 4,822,780 Houston 2,177,366,615 6/1/ % 52,910,009 Kemah 245,000 6/1/ % 245,000 League City 82,955,000 6/1/ % 72,560,739 Nassau Bay 2,958,457 6/1/ % 2,958,457 Pasadena 128,885,000 6/1/ % 19,680,740 Seabrook 13,205,000 6/1/ % 13,205,000 Taylor Lake Village 240,000 6/1/ % 240,000 Webster 21,216,264 6/1/ % 21,216,264 Counties: Galveston $ 183,893,422 6/1/ % $ 23,280,907 Harris 1,735,370,971 6/1/ % 78,265,231 Municipal Utility Districts: Baybrook MUD 1 $ 14,610,000 6/1/ % $ 14,610,000 Brazoria Co. MUD 18 30,465,000 6/1/ % 14,434,317 Clear Brook City MUD 44,734,007 6/1/ % 19,003,006 Galveston Co. MUD 2 6,555,000 6/1/ % 6,555,000 Galveston Co. MUD 3 7,400,000 6/1/ % 7,400,000 Galveston Co. MUD 6 20,955,000 6/1/ % 20,955,000 Galveston Co. MUD 13 8,965,000 6/1/ % 8,965,000 Galveston Co. MUD 39 17,375,000 6/1/ % 17,375,000 Harris Count MUD 55 20,920,000 6/1/ % 20,920,000 Harris Count MUD 373 5,570,000 6/1/ % 5,570,000 South Shore Harbour MUD 2 7,140,000 6/1/ % 7,140,000 South Shore Harbour MUD 3 4,015,000 6/1/ % 4,015,000 South Shore Harbour MUD 7 18,375,000 6/1/ % 18,375,000 Tara Glenn MUD 3,910,000 6/1/ % 3,910,000 Water Control and Improvement Districts: Clear Lake Water Authority $ 66,504,172 6/1/ % $ 44,517,893 Clear Lake Water Authority ,845,000 6/1/ % 9,225 Clear Lake Water Authority ,000 6/1/ % 720 Galveston County WCID 12 16,825,000 6/1/ % 16,825,000 Harris County WCID 156 4,870,000 6/1/ % 4,870,000 Port of Houston Authority 357,105,000 6/1/ % 16,105,

175 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT Table 12 DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT Page 2 of 2 For the Year Ended August 31, 2007 Amount of Net Debt Percentage Overlapping Governmental Unit Amount As Of Overlapping Debt Other Governmental Entities: Harris County Flood Control District $ 115,924,985 6/1/ % $ 5,228,217 Subtotal, overlapping debt 546,168,938 Clear Creek Independent School District Direct Debt 579,196,318 Total Direct and Overlapping Debt $ 1,125,365,256 Sources: Galveston Central Appraisal District and Harris County Appraisal District assessed value data was used to determine overlapping percentages. Each individual governmental unit provided debt information. Note: Overlapping governments are those that coincide, at least in part, with the geographic boundaries of the District. This schedule estimates the portion of the outstanding debt of those overlapping governments that is borne by the residents and businesses of the Clear Creek Independent School District. This process recognizes that, when considering the government's ability to issue and repay long-term debt, the entire debt burden borne by the residents and businesses should be taken into account. However, this does not imply that every taxpayer is a resident, and therefore responsible for paying the debt, of each overlapping government. 147

176 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT LEGAL DEBT MARGIN INFORMATION LAST TEN FISCAL YEARS Debt Limit $ 1,619,934,163 $ 1,504,013,507 $ 1,334,866,123 $ 1,273,672,267 Total Net Debt Applicable to Limit 574,970, ,886, ,815, ,407,565 Legal Debt Margin $ 1,044,963,683 $ 955,127,018 $ 831,050,798 $ 873,264,702 Total Net Debt Applicable to the Limit As a Percentage of Debt Limit 35.49% 36.49% 37.74% 31.44% Legal Debt Margin Calculation for Fiscal Year 2006 Assessed Taxable Value $ 12,631,884,210 Add back: Exempt Real Property 3,567,457,417 Total Assessed Value 16,199,341,627 Debt Limit (10% of total assessed value) 1,619,934,163 Debt Applicable to Limit: Schoolhouse and Refunding Bonds 579,196,318 Less: Amount set aside for repayment of bonds 4,225,838 Total Net Debt Applicable to Limit 574,970,480 Legal Debt Margin $ 1,044,963,683 Note: Although there is no legal debt limit in the State of Texas, most school business officials in the State hold the opinion that the Attorney General would not approve bonded indebtedness on excess of 10 percent of assessed value. 148

177 Table $ 1,183,200,103 $ 1,109,630,793 $ 1,043,572,945 $ 971,662,703 $ 903,264,553 $ 862,619, ,630, ,928, ,905, ,279, ,915, ,632,779 $ 882,569,505 $ 820,702,282 $ 755,667,580 $ 680,383,551 $ 739,349,262 $ 688,986, % 26.04% 27.59% 29.98% 18.15% 20.13% 149

178 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT Table 14 DEMOGRAPHIC AND ECONOMIC STATISTICS LAST TEN FISCAL YEARS Median Total Unemployment Rate (3) Fiscal Annual Annual Median Galveston Harris United Year Population (1) Income (2) Income (1) Age (2) County County Texas States ,000 $ 40,629 $ 2,666,278, % 4.3% 4.9% 4.5% ,000 44,218 2,934,969, % 4.7% 4.7% 4.2% ,000 42,950 2,899,125, % 4.3% 4.4% 4.0% ,000 44,218 3,067,623, % 4.7% 5.0% 4.7% ,000 48,647 3,466,098, % 6.1% 6.4% 5.8% ,000 51,611 3,774,054, % 6.8% 6.7% 6.0% ,000 73,584 5,518,800, % 6.3% 6.0% 5.5% ,000 75,562 5,837,164, % 5.6% 5.4% 5.1% ,400 78,129 6,252,273, % 5.0% 4.9% 4.6% ,000 Avail. 03/2008 Avail. 03/2008 Avail. 03/ % 4.2% 4.3% 4.6% (1) Estimated (2) Clear Lake Area Chamber of Commerce and City of League City Claritas Survey (3) Texas Workforce Commission 150

179 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT Table 15 PRINCIPAL EMPLOYERS For the Year Ended August 31, (1) Percentage Percentage of Principal of Principal Taxpayer Employees Rank* Employers Employees Rank* Employers Harris County Administaff, Inc. 19, % Wal-Mart Stores, Inc. 12, % Memorail Hermann Hospital System 12, % 10,288 5 (1) Shell Oil Company 11, % 12,976 3 (1) Halliburton Companies 11, % 14,640 1 (1) Hewlett-Packard (formerly Compaq) 8, % 11,560 4 (1) Methodist Hospital System 7, % 6,800 8 (1) Continental Airlines 7, % 13,323 2 (1) JPMorgan Chase (formerly Texas Commerce Bank) 6, % 6, (1) ATT (formerly SBC & SWB Telephone) 6, % 7,100 7 (1) Houston Industries (formerly HL&P & Entex) (1) 9,669 6 (1) Columbia / HCA (1) 6,500 9 (1) 104,925 99,233 Total Harris County Employment 1,848,555 (1) Galveston County University of Texas Medical Branch 10, % 13,000 1 (1) Clear Creek Independent School District 4, % 3,040 2 (1) BP-Amoco Oil Company 2, % 2,000 3 (1) American National Insurance Company (ANICO) 1, % 1,267 5 (1) Galveston Independent School District 1, % 1,710 4 (1) Landry's Seafood, Inc. 1, % Galveston County 1, % 1,067 7 (1) Texas City Independent School District % Moody Gardens % Mainland Medical Center % Union Carbide Corporation (1) 1,200 6 (1) Sterling Chemical (1) (1) Gulf Greyhound (1) (1) Dickinson Independent School District (1) (1) 23,989 25,874 Total Galveston County Employment 139,541 (1) Note: Clear Creek ISD encompasses parts of two counties and twelve cities. No source for employer ranking within distict boundaries is available. (1) Information not readily available. * Ranking is optional Source: Harris County - Houston Busines Journal, Business First Survey/Greater Houston Partnership/HBJ & Texas Workforce Commission Galveston County - Texas City - La Marque Chamber of Commerce, Galveston Chamber of Commerce & Texas Workforce Commission 151

180 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT FULL-TIME EQUIVALENT DISTRICT EMPLOYEES BY POSITION LAST TEN FISCAL YEARS Administrative / Professional General Administration Business / Finance Human Resources Instruction / Curriculum Technology / Information Systems Maintenance and Operations Principals Assistant Principals Librarians Counselors Nurses Diagnosticians Licensed Specialist in School Psychology Speech-Language Pathologists Teachers 2,483 2,329 2,203 2,099 2,022 Technology Campus Clerical / Office / Classroom Aides Attendance Clerk Secretary - Principal Bookkeeper Registrar Classroom Teacher Aide Special Education Aide Library Aide Other Central Office Clerical / Office Secretary Accounts Payable Clerks Payroll Clerks Purchasing Clerk Tax Office Clerk Receptionist PEIMS Data Specialist Other Auxiliary Transportation Food Service Maintenance - Custodial Maintenance - Other Skilled Craftsman Security Other Part Time Total 4,453 4,127 3,941 3,870 3,780 Source: District Records 152

181 Table ,055 1,956 1,878 1,776 1, ,610 3,482 3,405 3,200 3,

182 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT OPERATING STATISTICS LAST TEN FISCAL YEARS Governmental Fund Expenditures Government-wide Expenses Fiscal Average Cost Governmental Cost Year Daily Operating per Activities per August 31, Attendance Expenditures (1) Student Expenses Student ,018 $ 125,520,010 $ 4,824 N/A N/A , ,755,328 5,127 N/A N/A , ,891,764 5,727 N/A N/A , ,789,823 6,132 N/A N/A , ,515,141 6,077 $ 203,949,313 $ 6, , ,179,876 6, ,740,942 7, , ,242,685 6, ,152,654 7, , ,516,566 6, ,607,183 7, , ,083,620 6, ,641,695 8, , ,244,196 7, ,881,329 8,697 Source: District Records (1) Operating expenditures include governmental fund expenditures less debt service and facilities acquisition and construction expenditures. (2) Growth is higher than normal due to students displaced by Hurricanes Katrina and Rita. 154

183 Table 17 Students Percentage Student / Participating in District Employees Final Increase Teacher Free/Reduced Teachers Administrators Other Total Enrollment in Enrollment Ratio Lunch Program 1, ,115 3,103 28, % 16 3,654 1, ,137 3,200 28, % 16 3,661 1, ,239 3,405 28, % 15 3,872 1, ,229 3,482 29, % 15 3,881 2, ,232 3,610 30, % 15 4,408 2, ,447 3,780 31, % 16 4,644 2, ,460 3,870 32, % 16 5,196 2, ,400 3,941 33, % 15 6,144 2, ,452 4,127 35,143 (2) 4.97% 15 7,040 2, ,617 4,453 35, % 14 7,

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185 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT Table 18 TEACHER BASE SALARIES LAST TEN FISCAL YEARS Fiscal Minimum Maximum Statewide Year Salary (1) Salary (1) Average (2) 1998 $ 26,709 $ 46,111 $ 33, ,561 47,008 34, ,560 49,660 37, ,000 51,100 38, ,500 52,166 39, ,000 53,232 39, ,000 53,232 40, ,000 54,665 41, ,000 59,150 41, ,500 61,650 44,897 (1) Source: District Records (2) Source: Texas Education Agency website 157

186 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT Table 19 SCHOOL BUILDING INFORMATION Page 1 of 2 LAST TEN FISCAL YEARS Student Capacity 2006/2007 Percentage Year Building Building Portable Total Ending of Capacity School Constructed Age (Years) Capacity Capacity Capacity Enrollment Used High Schools Clear Brook , ,000 2,649 88% Clear Creek ,500 1,050 3,550 2,472 70% Clear Creek - 9th Grade Center , , % Clear Lake , ,900 2,595 89% Clear Lake - 9th Grade Center , , % Clear Path % Clear Springs , ,500 1,151 46% Clear View Education Center % Intermediate Schools Brookside , % Clear Lake , % Creekside % League City , ,250 1,172 94% Seabrook ,150 1,080 94% Space Center , ,225 1,146 94% Victory Lakes , ,200 1,073 89% Westbrook , ,500 1,445 96% Elementary Schools Armand Bayou % Bauerschlag % Bay % Brookwood % Clear Lake % Falcon Pass % Ferguson % Gilmore % Goforth % Greene % Hall % Hyde % Landolt % League City % McWhirter % North Pointe % Robinson % 158

187 CLEAR CREEK INDEPENDENT SCHOOL DISTRICT Table 19 SCHOOL BUILDING INFORMATION Page 2 of 2 LAST TEN FISCAL YEARS Student Capacity 2005/06 Percentage Year Building Building Portable Total Ending of Capacity School Constructed Age (Years) Capacity Capacity Capacity Enrollment Used Elementary Schools (Continued) Ross % Stewart % Ward % Weber % Wedgewood % Whitcomb % White % Other Clear Horizons Early College HS ** ** % Juvenile Justice Alternative Education *** * * * * * Galveston-Brazoria Co-op for Hearing Impaired **** * * * * * * Included in originating school. ** Located in off-site Community College *** Located in off-site alternative education facilities. **** Located in GBCHI Center Note: The District utilized 999 temporary buildings providing 1,998 classrooms in schools where enrollment exceeded building capacity. Source: Clear Creek Independent School District Facilities and Planning Department. 159

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189 Government Auditing Standards 161

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191 2000 Loop 197 North, Suite 200 Texas City, TX (409) Fax (409) Greenway Plaza, Suite 1515 Houston, TX (713) th Street Galveston, TX (409) Independent Auditor s Report On Internal Control Over Financial Reporting And On Compliance And Other Matters Based On An Audit Of Financial Statements Performed In Accordance With Government Auditing Standards To The Board of Trustees Clear Creek Independent School District League City, Texas We have audited the financial statements of the governmental activities, the business type activities, each major fund, and the aggregate remaining fund information of Clear Creek Independent School District (the District ) as of and for the year ended August 31, 2007 which collectively comprise the District s basic financial statements and have issued our report thereon dated January 24, We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reporting In planning and performing our audit, we considered the District s internal control over financial reporting as a basis for designing our audit procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the District s internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the District s internal control over financial reporting. A control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects an entity s ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the entity s financial statements that is more than inconsequential will not be prevented or detected by the entity s internal control. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected by the entity s internal control. MEMBERS: AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS, TEXAS SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS, CPA ASSOCIATES INTERNATIONAL, INC. WITH ASSOCIATED OFFICES IN PRINCIPAL U.S. AND INTERNATIONAL CITIES 163

192 Board of Trustees Page 2 Clear Creek Independent School District League City, Texas Our consideration of the internal control over financial reporting was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in the internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. Compliance and Other Matters As part of obtaining reasonable assurance about whether the District s financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests did not disclose instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Closing This report is intended solely for the information and use of the board of trustees, the audit committee, management, others within the organization and federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. Null-Lairson, PC Texas City, Texas January 24, 2008 MEMBERS: AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS, TEXAS SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS, CPA ASSOCIATES INTERNATIONAL, INC. WITH ASSOCIATED OFFICES IN PRINCIPAL U.S. AND INTERNATIONAL CITIES 164

193 2000 Loop 197 North, Suite 200 Texas City, TX (409) Fax (409) Greenway Plaza, Suite 1515 Houston, TX (713) th Street Galveston, TX (409) Independent Auditor s Report On Compliance With Requirements Applicable To Each Major Program And On Internal Control Over Compliance In Accordance With OMB Circular A-133 To the Board of Trustees Clear Creek Independent School District League City, Texas Compliance We have audited the compliance of Clear Creek Independent School District with the types of compliance requirements described in the U. S. Office of Management and Budget (OMB) Circular A-133 Compliance Supplement that are applicable to each of its major federal programs for the year ended August 31, The District's major federal programs are identified in the summary of auditor s results section of the accompanying schedule of findings and questioned costs. Compliance with the requirements of laws, regulations, contracts, and grants applicable to each of its major federal programs is the responsibility of the District s management. Our responsibility is to express an opinion on the District's compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the District's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination of the District's compliance with those requirements. In our opinion, the District complied, in all material respects, with the requirements referred to above that are applicable to each of its major federal programs for the year ended August 31, Internal Control Over Compliance The management of the District is responsible for establishing and maintaining effective internal control over compliance with the requirements of laws, regulations, contracts, and grants applicable to federal programs. In planning and performing our audit, we considered the District s internal control over compliance with the requirements that could have a direct and material effect on a major federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the District s internal control over compliance. MEMBERS: AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS, TEXAS SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS, CPA ASSOCIATES INTERNATIONAL, INC. WITH ASSOCIATED OFFICES IN PRINCIPAL U.S. AND INTERNATIONAL CITIES 165